Is the UK Economy Heading Towards Contraction?

After the recent release of manufacturing and services PMI figures for June, the UK looks set to have witnessed a contraction in its economy


After the recent release of manufacturing and services PMI figures for June, the UK looks set to have witnessed a contraction in its economy during Q2 this year. These latest figures points to a contraction in UK’s economy in Q2 2019, which could make it the first quarterly contraction in three years.

UK’s services PMI reading for June came at 50.2, below the expectations which were for a reading of 51, and just slightly above the 50-threshold. According to survey firm IHS Markit, the modest recovery witnessed in May was not present in June, where business activity in the services sector fell close to stagnation.

According to IHS Markit’s Chief Business Economist, Chris Williamson, the manufacturing and construction sectors witnessed a sharp fall in June, and coupled with a services sector in near-stagnation, this could very well be the first time since 2016 that the UK economy is showing signs of having fallen into contraction.

The weak readings of June could also be the fallout of the stockpiling effect from Q1 2019, which was caused due to the original Brexit deadline of March 29. A day after the release of UK’s services PMI data, GBP/USD continues to trade bearish, touching 1.2579 at the time of writing.

ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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