The risk of recession in the UK is increasing after an unexpected drop in business output in August, a survey of purchasing managers showed.
(Bloomberg) —
The risk of recession in the UK is increasing after an unexpected drop in business output in August, a survey of purchasing managers showed.
S&P Global said its composite indicator for private-sector production showed a contraction for the first time since February 2021, when the country was in a coronavirus lockdown. Services weakened substantially from an earlier estimate, and manufacturing is already in a downturn.
The figures show the worsening economic situation facing the next prime minister, who will be named later today. Liz Truss, the front-runner to replace Boris Johnson, has said she’ll announce aid to businesses and consumers in the first few days of her administration to help cope with a surge in energy costs.
“The incoming prime minister will be dealing with an economy that is facing a heightened risk of recession, a deteriorating labor market and persistent elevated price pressures linked to the soaring cost of energy,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
The research group’s composite measure for the economy dropped to 49.6 in August, below the threshold of 50 that separates growth from decline and under the initial estimate of 50.9. Services grew at a pace of 50.9, weaker than the initial reading of 52.5.
“Demand for consumer-facing services such as restaurants, hotels, travel and other recreational activities is collapsing,” Williamson said. “Financial services firms are meanwhile reporting subdued trading amid the recent hikes in interest rates, adding to an increasingly broad-based malaise across the economy.”
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