UK Final Services PMI misses estimates with 34.5 in March, GBP/USD refreshes lows

The UK services sector activity contracted more-than-expected in the month of March, the final report from IHS Markit showed this Friday. 

The seasonally adjusted IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) was revised lower to 34.5 in March versus 34.8 expected and a 35.7 – March’s first reading.

It’s the survey-record fall in service sector activity amid emergency measures to slow COVID-19 pandemic.

Key points

Fastest decline in activity since survey began in July 1996.

Rapid drop in new work and widespread job cuts.

Margins under pressure as charges fall while costs rise.

Tim Moore, Economics Director at IHS Markit, which compiles the survey

“A record slump in UK service sector activity reported in March adds to the increasingly bleak economic statistics seen recently across the developed world. Emergency public health measures to combat the COVID-19 pandemic continue to mothball business operations, force aggressive cutbacks on non-essential expenses and trigger distress for household finances.”

"The severe impact on service sector activity in March was by no means limited to consumer-facing businesses or those directly hit by international travel restrictions. Technology services were the only area to signal a rise in business activity, but even this pocket of growth looks fragile as new workloads dropped more quickly in this category than at any time since 2011.”

FX implications

The bearish pressure around the pound intensified following the sharp downward revision to the UK Services PMI for March, as GBP/USD refreshed daily lows at 1.2325. Broad-based US dollar strength remains the main driver behind the cable weakness.