Britain just got its first concrete sign that Brexit will destroy the economy
Britain just got its first concrete sign that the British exit from the European Union, or Brexit, will crush the nation’s economy after a grim set of PMI data released by Markit on Friday morning showed a “dramatic deterioration” in the economy since the UK voted to leave the EU.
Markit’s flash PMI readings for the UK’s economy showed that composite output fell to its lowest level since March 2009, during the tail end of the global financial crisis.
Here is the scoreboard:
- Services PMI — 47.4, down from 52.3 in June and at an 87-month low. The figure was well below the 49.2 forecast.
- Manufacturing PMI — 49.1, a 44-month low, and well below the expected 50 reading.
- Composite PMI — 47.7, a drop from 52.4 in June, and at an 87-month low.
The PMI, or purchasing managers index, figures from Markit are given as a number between 0 and 100.
Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the better.
The figures are a flash reading, meaning they could easily be revised upward or downward when final readings come in at the end of the month.
Speaking about the data, Markit’s chief economist, Chris Williamson, said (emphasis ours):
“July saw a dramatic deterioration in the economy, with business activity slumping at the fastest rate since the height of the global financial crisis in early-2009.
“The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to ‘Brexit.'”
And here is Markit’s terrifying chart, showing just how massive the contraction in post-Brexit Britain has been so far:
Unsurprisingly, the data was not greeted happily by economists, with Samuel Tombs of Pantheon Macroeconomics saying in an emailed note (emphasis ours):
“The collapse in the composite PMI to its lowest level since April 2009 provides the first major evidence that the U.K. is entering a sharp downturn. If the PMI remains at July’s level in August and September, it will be consistent on past form with a 0.4% quarter-on-quarter decline in GDP in Q3. The confidence shock from the Leave vote might wear off over the coming months, but the decline in the new orders index to just 46.2, from 53.0 in June, points to even faster falls in output ahead.”
Earlier Friday, Markit data showed that the eurozone economy was showing “surprising resilience” to the Brexit vote, with PMIs falling a little in June but beating the expectations of economists polled before the release.