Brexit anxiety dragging United Kingdom economy nearly to standstill

Brexit anxiety dragging United Kingdom economy nearly to standstill

Chris Williamson, chief business economist at IHS Markit, which compiles the survey, said the service sector is showing "worrying signs" of having lost steam amid intensifying Brexit anxiety, as the final two months of 2018 saw the weakest back-to-back expansions of business activity since late-2012.

"The latest United Kingdom services PMI provides further evidence that the economy has lost most, if not all, of the momentum it had last summer", ING economist James Smith said.

After accounting for seasonal factors, the IHS Markit Eurozone Manufacturing purchase management index (PMI) recorded a final reading of 51.4 in December, down from 51.8 in November.

Five US Federal Reserve (Fed) indexes of regional manufacturing all slumped in December, the first time they've fallen in unison since May 2016.

Manufacturing gauges across the world's largest economies stumbled at the end of previous year, starting 2019 with fresh challenges for global growth and central banks. The services PMI published Friday showed that wages are increasing, pushing up costs for firms.

The latest numbers from British manufacturers are in stark contrast to numerous world's top economies, which posted a contraction last month.

This situation reflects in part the ongoing trade tensions between the US and China.

China confirms United States trade talks in Beijing next week
Last year, China and the United States imposed tariffs on more than $300bn (£237bn) worth of each other's goods. Washington has imposed punitive tariffs of up to 25 percent on $250 billion of Chinese goods.

Financial information company Markit said that the increase in buying was due to manufacturers stockpiling parts and finished goods ahead of Brexit, as opposed to it indicating increasing confidence.

"The weakness of the recent survey data, in fact, raises the possibility that the goods producing sector could even act as a drag on the overall economy in the fourth quarter, representing a marked contrast to the growth surge seen this time a year ago". The rate of increase was the second-strongest since the survey began in 1992, beaten only by the expansion seen in May 2018.

Despite a softer rise in new business volumes, latest data signalled a faster accumulation of unfinished work at manufacturing companies.

Irish manufacturing activity eased as the year drew to a close, with output, new orders and employment growth all slowing, according to the latest report on the sector. The pace of inflation fell to an 11-month low.

Input prices continued to rise in December, albeit at a weaker pace than in the past few months. There were reports from panellists of lower costs for items such as oil and paper.

"Survey respondents also noted that the strengthening infrastructure pipeline is set to become a key engine of growth in 2019, despite concerns about possible delays to the delivery of major projects".

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