Press release

5 Dec 2022 London, GB

November's PMIs point to a gloomy outlook at home and abroad – EY ITEM Club comments

Martin Beck, Chief Economic Advisor to the EY ITEM Club, provides analysis on the latest services PMI.

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  • November's UK S&P Global/CIPS services Purchasing Managers’ Index (PMI) remained unchanged at 48.8. Activity fell, with a third successive fall in new orders reflecting weak demand at home and abroad. It appears increasingly evident that the UK economy is in recession.
  • The weakness in demand is increasingly affecting businesses’ pricing power, with output price inflation cooling despite stronger cost pressures. Overall, it would seem the survey is consistent with the EY ITEM Club prediction that the Monetary Policy Committee (MPC) will shift down to a 50bps rate hike at its December meeting

Martin Beck, chief economic advisor to the EY ITEM Club, says: November's services PMI remained unchanged at 48.8. Combining the services reading with November's manufacturing survey, the composite PMI was also unchanged at 48.2, the fourth successive sub-50 contractionary reading.

“Respondents reported a significant fall in orders for new work, reflecting weaker demand from both domestic customers and those abroad. The weakness was also broad-based across the sub-sectors, with cost-of-living pressures feeding through into lower consumer demand and businesses reporting fragile confidence. This adds to the evidence that suggests UK GDP is likely to fall in Q4, despite the mechanical boost it will likely receive from the comparison with Q3, which had an extra bank holiday.

“The survey pointed to a further easing in inflationary pressures. Input costs edged up from October's 13-month low, but falling demand is increasingly weighing on businesses’ margins and the balance for output prices fell again. Still, both cost and price inflation remained well above their long-run averages, and this is consistent with the EY ITEM Club’s view that while inflation likely peaked in October, with some cost pressures still feeding along the supply chain, the fallback will be gradual. Lower activity and softening price pressures are also in line with the EY ITEM Club’s view that the MPC will shift down to a 50bps rise at their December meeting, after increasing by 75bps in November.”