Monday 30 May 2016 2:54 pm

New economic data to underline UK’s struggle for growth this week

By: Jake Cordell

The UK economy is still struggling for momentum, fresh data out this week is likely to confirm.

Economists expect the bellwether purchasing managers’ indexes (PMIs) to remain glued at three-year lows as businesses and consumers remain cautious until after the EU referendum.

Readings on all three measures – which cover the services, manufacturing and construction sectors – collapsed to scores not seen since 2013 last month. Vicky Redwood of Capital Economics said after such dismal performance, the scores would normally rebound the next month, but this time she is not ruling out the prospect of them falling even further.

“Given the proximity of the referendum, there is obviously a risk that the surveys have dropped sharply,” Redwood said.

Manufacturing, helped by stubbornly low energy prices and the continuing weakness of the pound, is expected to climb back above the 50-mark which separates contraction from expansion, after dropping to 49.2 in April.

Construction is expected to drop even further to 51.5 from 52 due to “increased caution among clients amid heightened UK economic uncertainties that are being magnified as June’s EU referendum looms,” according to Howard Archer of IHS Global.

The most important figures, in terms of economic growth, however, will come from the services sector, which is expected to improve very slightly from 52.3 to 52.5. This would be the second-lowest score in almost three years and raise serious questions about how fast the UK economy is growing during the second quarter of the year.

Unlike with the other sectors, economists said it was unlikely services activity would come roaring back in the event of a vote to stay, since the slowdown pre-dates the announcement of the referendum.

Without a substantial improvement, expectations are that GDP growth “will struggle to come in any higher than 0.2 per cent” for the second quarter, Archer said.