2020.04.0311:23:00UTC+00UK Service Sector Contracts Most Since 1996

The UK service sector registered its steepest downturn in more than two decades in March due to business shutdowns and order cancellation in response to the coronavirus, or covid-19, pandemic.

The services Purchasing Managers' Index fell to 34.5 in March from 53.2 in February, survey data from IHS Markit and Chartered Institute of Procurement & Supply showed Friday. This was also below the flash reading of 35.7.

The score exceeded the previous record low seen at the height of the global financial crisis and suggested the fastest downturn since the survey began in July 1996.

Reflecting the output volumes trend, there was a record drop in new work due to a slump in business and consumer spending amid emergency public health measures to halt the spread of virus.

New business from abroad fell at an even faster pace in March. A sharp fall in new orders translated into excess business capacity to meet existing workloads.

Employment numbers fell for the first time in five months and at the fastest rate since June 2009. A number of companies reported placing staff on furlough.

Average cost burdens increased at the slowest pace for just over four years in March. At the same time, prices charged by service sector companies fell at the steepest rate since August 2009.

Meanwhile, business expectations for the next 12 months dropped to the lowest in more than twenty years of data collection.

At 36.0 in March, down sharply from 53.0 in February, the IHS Markit/CIPS composite output index dropped to its lowest level since this series began in January 1998. The flash score was 37.1.

The downward revisions to March's PMIs confirm that the measures taken to slow the spread of the coronavirus have pushed the economy into a recession of unprecedented scale and depth, Andrew Wishart, an economist at Capital Economics, said.

The likelihood of a global recession is now a given, though its duration and severity has yet to reveal itself, Tim Moore, an economics director at IHS Markit, said. One thing is for certain, with the lowest business optimism for over 20 years, the immediate outlook for the services sector is beyond grim.