boris johnson brexit economy

Ghastly UK PMIs Underscore Precarity Of Post-Election Economic Outlook

"December’s PMI survey sadly lacked festive cheer".

Wish Boris Johnson luck, he’s going to need it as the calendar flips, data out Monday suggests.

“December’s PMI survey sadly lacked festive cheer, indicating that the economy contracted for the third time in the past four months”, Chris Williamson, Chief Business Economist at IHS Markit, said, describing a dour set of flash prints for the UK.

At 48.5, the composite gauge is the lowest since the aftermath of Brexit, falling from 49.3 in November, and logging the second straight month in contraction.

As you can see, the manufacturing gauge dropped too, falling to 47.4, a wide miss to consensus (49.2) and below even the most pessimistic estimate (48.3). It’s the lowest print in four months and the eighth straight month in contraction.

The manufacturing output index, meanwhile, dove to 45.8. That is an 89-month low.

“Manufacturing production is falling at a rate exceeded only once since the height of the global financial crisis in early 2009, but output of the vast service sector has now also fallen in each of the past two months, representing the first back-to-back declines since 2009”, Williamson went on to say.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, echoed Williamson’s alarm. “The biggest shock came in the form of the worst output performance from the manufacturing sector since July 2012”, Brock remarked.

Last week, the pound and UK assets more generally interpreted the landslide Conservative victory as a sign that better days lay ahead – at least to the extent there will be some measure of closure on Brexit.

But, as we noted on Thursday evening, there’s plenty of wrangling ahead and in some respects, the UK economy enters 2020 facing an even more uncertain future than before. After all, Brexit is still Brexit – a geopolitical earthquake of epic proportions that will reshape the UK economy and its relationship with the rest of the world.

“Any vestiges of hope are now pinned on the election results as the potential for reducing uncertainty may restore confidence in the months ahead”, Brock went on to assess, before warning that “the Brexit path is still littered with obstacles and the need for strong negotiation skills for a future EU agreement will be paramount to avoid this downward slide becoming the economic landscape for an extended period”.


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