Forex trading – the pound gave up a little of April’s gains this week as a triple bill of weak PMI data pointed to slowing growth and weakening business confidence in the run-up to the UK’s referendum on membership of the European Union in June.

Growth in manufacturing, construction and services slowed last month, with firms dialling back on investment and hiring as they look to a possible Brexit and what that may mean for the British economy.

Manufacturing_generic

Manufacturing

 

The CIPS/Markit manufacturing PMI fell below the critical 50 mark – which separates contraction from expansion – for the first time since February 2013.

Lacklustre production and new order trends, coupled with declines in employment and stocks of purchases, dragged the index lower, to a reading of 49.2 from 50.7 the previous month.

Brexit risks were a factor, according to survey compilers Markit, but so too is the weak oil sector and a shaky retail market.

“Manufacturers are emphasising slower domestic demand growth and declining new export orders as the key weaknesses they are facing, amid rising uncertainty about the global economy, the oil & gas industry, retail sector and the EU referendum. With this backdrop unlikely to change in the coming months, the second quarter is likely to remain a bleak landscape for industry,” commented Rob Dobson, senior economist at Markit.

Construction

 

In construction, output growth also slowed to its weakest level in three years. Business activity expanded at its weakest pace since June 2013 and firms reported reduced confidence for the future.

At a reading of 52.0, the index still shows expansion in the sector rather than contraction. But it’s down from a reading of 54.2 the previous month as lacklustre residential construction weighed heavily.

Services

 

Likewise, the UK’s all-important services sector endured its weakest growth in over three years in April as the business activity index slumped to a 38-month low.

It was the third time in the last five months that the rate of expansion in the sector has slowed and points to depressed confidence across the UK economy.

The survey revealed the slowest increase in employment since August 2013, while input price inflation accelerated to a 27-month high.

David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, says: “The UK’s services sector is stuck between a rock and a hard place.

He adds:  “The looming EU referendum has had a profound effect on the sector, keeping prices relatively stagnant and delaying new orders. At the other end of the supply chain, the National Living Wage has compounded cost increases, resulting in the overall rate of input price inflation hitting a 27-month high.

“The EU referendum and introduction of the National Living Wage are unique moments in time for the UK services sector, and indeed the wider economy. The question lingers as to how deep an impact they will both have on the sector in the long term.”

‘Triple Whammy’

 

Chris Williamson, Chief Economist at Markit, describes this week’s PMIs as a “triple-whammy of disappointing news on the health of the economy at the start of the second quarter”.

He adds: “The PMI surveys are collectively indicating a near stalling of economic growth, down from 0.4% in the first quarter to just 0.1% in April.”

The effect on sterling has been noticeable – GBPUSD retreated from year-to-date highs hit at the end of April as the pound gave up a cent to the dollar following the weak data.

Reports from the US have been mixed, with the ISM manufacturing PMI missing expectations before the service sector report beat estimates.