LONDON: Britain’s economy got off to a weak start to the final quarter of 2019, according to surveys which showed the giant services sector stagnated last month, with concerns about Brexit depressing new orders, while consumers stayed cautious.
Britain had been due to leave the European Union on Oct. 31 which prompted limited stockpiling by businesses and households.
But Brexit has now been delayed until Jan. 31, with an election on Dec. 12 raising further uncertainty.
The IHS Markit services Purchasing Managers’ Index (PMI) edged up to 50.0 — which represents zero growth — from 49.5 in September, which was one of the lowest readings since Britain was last in recession in 2009.
The all-sector PMI, covering manufacturing and construction as well as services, remained below 50 for a third month in a row, the first time this has happened since 2009.
“The underlying business trend remains one of stagnation at best,” IHS Markit economist Chris Williamson said.
October’s PMI readings on their own were consistent with a 0.1 percent quarterly fall in overall economic output, Markit said.
Britain’s economy has lost momentum this year, hurt by a global downturn due to the US-China trade war as well as increased Brexit uncertainty.
In the euro zone, the manufacturing PMI contracted even more sharply than in Britain, reflecting the bloc’s greater reliance on exports to China.
British consumer spending has been more resilient than business investment, but surveys on Tuesday showed a slowdown here too.
The British Retail Consortium said high street spending rose 0.6 percent in October, the most since April. But on a rolling basis sales have grown by an average of just 0.1 percent over the past 12 months, the lowest on record.
Barclaycard data showed spending growth slowed to 1.5 percent from 1.6 percent last month, and the Society of Motor Manufacturers and Traders reported a 7 percent annual fall in new car sales.
A brighter note came from a survey by HSBC which, in contrast to most others, showed businesses were cheerier about export prospects than a year ago.
Businesses have struggled to plan around deadlines for leaving the EU that have changed three times this year, leading to volatility in official figures that has not always been tracked by the PMI.
Official data showed the economy shrank by 0.2 percent in the three months to June as businesses dealt with an overhang of raw materials bought before the original March 29 Brexit deadline.
Most economists expect a limited rebound in the third quarter, meaning Britain would dodge a recession.
But the overall picture is muted, with Morgan Stanley — one of the gloomier forecasters — predicting growth of just 0.2 percent in the third quarter and stagnation in the fourth.
The Bank of England is due to update its growth forecasts on Thursday but economists polled by Reuters do not expect any change in interest rates ahead of December’s election.
The opposition Labour Party plans to renegotiate Brexit and put the revised deal to a referendum. It also promises a significantly more interventionist approach to the economy.
For now, businesses surveyed by IHS Markit say Brexit worries are reducing orders, which fell in October by their most in six months for services businesses. On the all-sector measure, orders fell at the third-fastest rate since 2009.
UK economy starts Q4 on weak note as Brexit hits orders
UK economy starts Q4 on weak note as Brexit hits orders
- Britain had been due to leave the European Union on Oct. 31 which prompted limited stockpiling by businesses and households
- But Brexit has now been delayed until Jan. 31, 2020
Global Markets: Asian stocks fall as Iran war keeps oil at $100, upends rate outlook
- Asian stocks set for consecutive weeks in the red
- Traders rapidly cut Fed rate cut wagers for the year
- Investors focus on oil prices, inflation risks
SINGAPORE: Asian stocks slumped on Friday, poised for a second straight weekly decline as fast-dwindling hopes of a resolution to the US and Israel’s war with Iran kept oil prices aloft, casting a shadow over global markets and spurring inflation fears.
The US dollar has become the safe-haven of choice during the tumult, putting most other currencies under pressure. The dollar was set for a second consecutive week of gains and is up 2 percent since the war broke out at the end of February.
The yen hit its weakest level since July 2024 at 159.69 per US dollar on Friday as Japan warned that it was ready to take action to protect against yen declines. It was last at 159.41.
Analysts said the bar for intervention is higher this time around as any intervention now could prove futile in the face of the relentless dollar buying.
In Asia, MSCI’s broadest index of Asia-Pacific shares slipped 1 percent, on course for a 2.2 percent decline for the week. Japan’s Nikkei fell 1.4 percent, while tech-heavy South Korean stocks slid nearly 2 percent.
European futures point to a slightly higher open but may struggle to hold those gains on weak sentiment.
Oil prices remained close to $100 per barrel level, although they eased a bit on Friday after US issued a 30-day license for countries to buy Russian oil and petroleum products currently stranded at sea.
Brent futures were at $100.70 a barrel at 9:47 a.m. Saudi time, while West Texas Intermediate crude was at $95.59. They were both hovering around $60 levels at the start of 2026.
“Headlines are coming at the market like water from a fire hose, which is impacting the price of oil, and consequently, financial markets,” said Mitch Reznick, group head of fixed income at Federated Hermes.
“The question remains to what extent we are caught in the $80-plus range even as the headlines become banal with their frequency and contradictions.”
With Iran stepping up attacks across the Middle East as its new Supreme Leader Mojtaba Khamenei vowed to keep the Strait of Hormuz shipping lane closed, investors are bracing for a prolonged conflict and higher oil prices.
The spectre of rising inflation has led markets to rapidly reprice what they expect from central banks this year, with traders now anticipating just 20 basis points of easing from the Federal Reserve compared to 50 bps of cuts priced in last month.
The selloff in global stocks and bonds shows no signs of easing. US stocks fell sharply overnight and the two-year Treasury yields, which typically move in step with Fed interest rate expectations, scaled a six-month high on Thursday.
“With the possibility of higher oil prices still elevated, investors should be prepared for continued volatility and potentially further downside in the near term,” said Vasu Menon, managing director of investment strategy at OCBC in Singapore.
Shifting rates outlook
Jose Torres, senior economist at Interactive Brokers, said the impact of rising oil prices on corporate margins, inflation expectations, rate-cut prospects and yields is sparking volatility, leaving participants with few places to hide.
“Indeed, sinking optimism about Fed rate reductions amid strengthening cost pressures is weighing on traditional safe havens such as silver, gold, and government debt.”
The two-year note yield eased 3 bps to 3.730 percent after hitting its highest level since August 22 on Thursday. The yield has gained 35 bps in the two weeks since the war started.
The yield on the longer-dated 30-year bond has risen 24 bps this month.
Investor focus will switch to a slate of policy meetings next week with the Fed, the Bank of Japan, the European Central Bank and the Bank of England all due to meet, with most expected to keep rates unchanged. The Reserve Bank of Australia is broadly expected to hike rates next week.
In currencies, the euro was steady at $1.15035, on course for a weekly decline of nearly 1 percent. The dollar index was at 99.816, set for about a 1 percent weekly advance.
Gold was 0.4 percent higher at $5,101 per ounce on Friday but set for a 1 percent drop for the week.
