Let's see if services will resurface in January

UK Services Remain in Contraction Again, But Manufacturing Surges

Posted Wednesday, December 16, 2020 by
Skerdian Meta • 2 min read

The service sector was hit the hardest during the lock-down months, falling into a deep recession that lasted throughout spring. We saw a decent recovery during summer, but in autumn, this sector weakened again, and with the new partial lockdowns, services were expected to fall into contraction again, which they did in November. This month they were expected to come out of contraction but, so far, they have remained there.

UK December Services PMI Report

  • December flash services PMI 49.9 points vs 50.7 expected
  • November flash services was 47.6 points
  • Manufacturing PMI 57.3 points vs 56.0 expected
  • Prior manufacturing PMI 55.6 points
  • Composite PMI 50.7 points vs 51.5 expected
  • Prior composite PMI 49.0 points

As the November lockdowns eased, the UK economy stabilized somewhat in December, with the manufacturing sector particularly bolstered by a boost to manufacturing orders, in a rush to beat the Brexit transition period deadline.

Markit Notes:

“The UK economy returned to growth in December after the lockdown-driven downturn seen in November, adding to signs that the hit to the economy from the second wave of virus infections has so far been far less harsh than the first wave in the spring.

“The recovery lacked vigour, however, as the service sector remained under particular strain, only contracting marginally as ongoing social distancing measures due to tiered lockdowns continued to hit many parts of the economy. Consumer-facing services, notably hotels, restaurants and tourism, reported further marked declines in output, largely offsetting renewed growth in business services, transportation and manufacturing.

“The manufacturing and transport sector improvements were linked to reviving global trade and a temporary boost from Brexit-related stockpiling, which reportedly buoyed order books and exports during the month.

“While job losses continued to be reported during the month, it was encouraging to see the rate of job cutting ease to the lowest level since the start of the pandemic. Business optimism about the year ahead also remained buoyant, reflecting the light at the end of the tunnel created by the roll-out of the COVID-19 vaccines. Optimism waned slightly compared to November, however, largely due to rising concerns over a no-deal Brexit.”

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