UK Preliminary Manufacturing PMI misses estimates with 52.9 in Jan, GBP/USD keeps lows

The UK manufacturing and services sector activities deteriorated in January, the preliminary report from IHS Markit showed this Friday. 

The seasonally adjusted IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) hit a seven-month low of 52.9 in January versus 54.0 expected and 57.5 – December’s final reading.

Meanwhile, the Flash UK Services Business Activity Index for January contracted to an eight-month low of 38.8 versus December’s final readout of 49.4 and 45.0 expected.

Chris Williamson, Chief Business Economist at IHS Markit, commented on the survey

“A steep slump in business activity in January puts the locked down UK economy on course to contract sharply in the first quarter of 2021, meaning a double-dip recession is on the cards. “Services have once again been especially hard hit, but manufacturing has seen growth almost stall, blamed on a cocktail of COVID-19 and Brexit, which has led to increasingly widespread supply delays, rising costs and falling exports.”

“Worryingly, January also saw companies reduce headcounts at an increased rate again – albeit less so than seen between March and November. The steepest loss of jobs was recorded in the hotels, restaurants, travel and leisure sectors, reflecting the new lockdown measures.”

FX implications

The downbeat UK Preliminary Manufacturing and Services PMIs exerted additional downside pressure on GBP/USD, as the major refreshed daily lows at 1.3655. The spot sheds 0.49% on a daily basis.