U.K. PMIs confirm moderate growth rate

The September Services headline PMI of U.K. continued its decline, by 2.7 points to 53.3, significantly lower than expectation. On a quarterly basis, the Q3 average declined 2.7pp to 55.4 from the Q2 average.

The headline services index of the country came in at its lowest reading since April 2013, also dipping below its long-term average. All output categories reported declines over the month. Business expectations fell to their lowest level since August last year (-1.9pp to 68.8), now approaching their long-term average. Outstanding business fell further, to 50.6, and new business dropped sharply, to 55.0, its lowest reading since April 2013. 

On the other hand, employment expanded at a faster pace, rising by 1.3 points to 55.5. Prices charged picked up to 50.8, while the input price component rose to 54.1 (+0.5 and +0.9 points, respectively).

Today's downward surprise points to continued moderation and confirms growth moderation is underway. This underscores our more cautious macro view that economic activity is to abate over the coming months, with GDP growth easing to around 0.5% q/q in Q3 and Q4 from a barely 0.7% q/q print in Q2. 

On Wednesday 7 October, August industrial production & manufacturing output is scheduled to release. As industrial production is a strong indicator of economic growth, Q3 growth will ease from Q2, says Barclays.