UK economy loses some of its bounce in September
PMI data released this morning shows the UK economy is losing steam, after consumer-facing services stalled. The restaurant sector in particular has seen a sharp fall in demand, mainly due to the the 'Eat out to help out' scheme coming to an end last month. But it's clear companies have struggled to bring custom through the door even with the new Covid measures and it seems consumers are still reluctant to spend money.
However, the EU produced much worse services PMI data showing business activity grinding to a halt. Both German & French figures came in well below expectations, causing activity to fall for the first time in 3-months. The manufacturing sector has saved the € today though after positive figures show a foreign demand has helped bolster new orders. The UK showed robust growth in the manufacturing sector itself though, which is encouraging to see. The financial sector though continues to keep the UK economy propped up after once again producing strong figures.
The new lockdown measures yesterday from the Government, caused the Pound to fall around 0.5%. There was a lot of pressure from MP's in the House of Commons to extend the current furlough scheme the same as Germany, France & Spain have done recently. However today that prospect has been dealt a blow after the PM has just said "It's not sensible to extend the scheme".
Investment JP Morgan have today announced they are planning to move €200bn from London to Frankfurt before the end of the year. Things like this just add to the negativity around the UK and £ at the moment and the list is likely to get longer in the weeks ahead. EU Chief Negotiator Michel Barnier is in London today for 'informal talks' and has commented once again that he remains "determined" a deal will be agreed.
The Pound has so far lost 3% against the Euro and 4% against the US Dollar in September. Because of the number of headwinds against the UK just now, we can expect to see more Sterling weakness in the weeks to come.