Business crisis fuels recession fears
Britain’s private sector is contracting at the fastest rate since the country went into lockdown, raising fears of a recession.
September’s monthly Purchasing Managers’ Index (PMI) delivered the weakest reading since January 2021.
Excluding the pandemic, it was the worst since March 2009 and suggested the economy was on track to contract more than 0.4 percent in the third quarter.
Bank of England officials had been given a glimpse of the figures before voting earlier in the week to keep interest rates unchanged, citing fears of a slowdown as a key reason for the pause.
Eurozone-wide PMI figures also paint a gloomy picture, with Germany increasingly seen as Europe’s sick man and suffering from a sustained decline in demand.
Warning sign: Eurozone-wide PMI figures also paint a gloomy picture: Germany is increasingly seen as the sick man of Europe, suffering from a sustained drop in demand.
Separate data yesterday offered a more optimistic forecast for the UK economy, with a survey showing a recovery in consumer confidence and retail sales figures showing a 0.4 per cent rise in August.
But the improvement in retail trade was only a partial recovery after a 1.1 percent drop in rain-hit July.
Investec economist Sandra Horsfield said rising unemployment and pressure from higher interest rates would likely prevent the High Street from experiencing a much bigger recovery this month. “We continue to think the economy is entering more turbulent waters and that a (relatively mild and short-lived) recession is likely this winter,” Horsfield said.
Preliminary UK PMI figures showed a reading of 46.8 in September, up from 48.6 in August.
“Respondents cited weaker demand due to cost-of-living pressure and higher borrowing costs, along with spending cuts among customers in the real estate and construction sectors,” the report said.
“Some manufacturers suggested that customers’ reduced stock had acted as a brake on their production needs.”
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: ‘The disappointing September PMI survey results mean a UK recession looks increasingly likely.
“The sharp decline in output signaled by preliminary PMI data is consistent with GDP contracting at a quarterly rate of more than 0.4 percent, with a broad-based slowdown gathering momentum to hint at little hope for an imminent improvement.” . The Bank of England’s outlook is slightly less dire, but it has still lowered its GDP growth forecast for the third quarter from 0.4 percent to 0.1 percent.
