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Most businesses blamed a contraction in activity in November on faltering confidence among both domestic and overseas customers, who are worn out by continuing political indecision.
Analysts said that the latest snapshot of the UK services and manufacturing sectors would heap pressure on the Bank of England to cut interest rates in the first half of next year. Not since July 2016 and the weeks after the EU referendum have businesses cut back on new orders and production to such an extent, according to the IHS Markit/CIPS flash index of business activity.
The composite purchasing managers’ index (PMI) covering the two sectors fell to 48.5 from 50 in October, where a figure below 50 indicates contraction. It is the first time the flash measure, which covers about 85% of the full PMI data, has been used to give an early indication of UK private sector activity.
Chris Williamson, the chief business economist at IHS Markit, said the figures suggested the UK economy was likely to shrink in the final quarter of 2019, following growth of 0.3% in the third quarter.
He said: “With an upcoming general election adding to Brexit-related uncertainty about the outlook, it’s no surprise to see UK businesses reporting falling output and orders in November. The weak survey data puts the economy on course for a 0.2% drop in GDP in the fourth quarter, and also pushes the PMI further into territory that would normally be associated with the Bank of England adding more stimulus to the economy.” [...]