UK December PMI Plunges To Sub-50 Level, Lowest Since April 2009, As Inflation Slashes UK Margins Next

Tyler Durden's picture

That whole reverse decoupling meme, where the US is supposed to bail out the world (courtesy of a "stimulative" payroll tax cut of all things) better work soon, cause after an insolvent Eurozone, and a tightening China where the interbank lending market is all but dead, now we get a UK PMI index which plunged from 53 to 49.7 (on expectations of 53). This was the lowest print in the index since April 2009. And confirming the trend that every single diffusion and manufacturing index in the US has been warning about, is that corporate input costs surged to the highest since September 2008 as average cost inflation
accelerated markedly in December. Following in the footsteps of Walmart, Tesco will likely start selling 49 ounce coffee in 33 ounce coffee containers next (at the same price of course), hoping nobody will notice.

More from Market News:

The service sector contracted in December, with the all sector output PMI falling sharply from November but with growth still in positive territory.

The Purchasing Managers Index from Markit for the Chartered Institute of Purchasing and Supply showed the weakest services outturn for 20 months. The December CIPS services index, released by Reuters, came in at 49.7, down from 53.0.

Markit said activity had been hit by the exceptionally poor weather but also noted new business was weak.

Input costs for companies also rose as average cost inflation accelerated markedly in December to reach the highest level since September 2008, Markit said.

Employment in the service sector fell for a third successive month and at a slightly faster rate of decline than in November.

The services data follow weak CIPS construction and manufacturing data for December.

The PMI all sector Output Index fell from 54.0 in November to 51.4 in December, the largest monthly points fall since November 2008.

Markit said the data point to GDP growth of around 0.4% in Q4, down from 0.7% in Q3 and suggest a slowing in GDP growth to near-stagnation in December.

Commenting on the data, Vicky Redwood, Senior UK Economist at Capital Economics said:

"The outstanding business, new business and employment balances all fell. Admittedly, at least some of this is probably due to the snow, which disrupted travel and kept people at home. Indeed, it is notable that the business expectations balance rose. Accordingly, some rebound in activity is likely in January."

"Nonetheless, the survey clearly suggests that the economy ended last year on a rather weaker note than the recent upbeat manufacturing data have suggested."