Britain’s private sector is shrinking at the fastest pace since the nation was in lockdown – adding to fears of a recession.
The monthly purchasing managers’ index (PMI) for September delivered the weakest reading since January 2021.
Disregarding the pandemic, it was the worst since March 2009 and suggested that the economy was on course to shrink by more than 0.4 per cent in the third quarter.
Bank of England officials had been given a view of the figures before voting earlier in the week to keep interest rates on hold, citing fears of a slowdown as a key reason for the pause.
PMI figures from across the eurozone also painted a grim picture – with Germany increasingly seen as the sick man of Europe, suffering a sustained decline in demand.
Warning sign: PMI figures from across the eurozone also painted a grim picture – with Germany increasingly seen as the sick man of Europe, suffering a sustained decline in demand
Separate data yesterday offered a more cheerful prognosis for the UK economy with a poll showing consumer confidence recovering and retail sales figures showing a rise of 0.4 per cent in August.
But the retail improvement was only a partial recovery after a 1.1 per cent decline in rain-hit July.
Investec economist Sandra Horsfield said rising unemployment and the squeeze from higher interest rates were likely to hold back the High Street from seeing much more of a recovery this month. ‘We remain of the view that the economy is entering more troubled waters and that a (relatively mild and short-lived) recession is likely to ensue this winter,’ Horsfield said.
The UK ‘flash’ PMI figures gave a reading of 46.8 for September, down from 48.6 in August.
‘Weaker demand due to cost of living pressure and higher borrowing costs were cited by survey respondents, alongside cutbacks to spending among clients in the real estate and construction sectors’ the report said.
‘Some manufacturers suggested that customer destocking had acted as a brake on their output requirements.’
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: ‘The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK.
‘The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4 per cent, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement.’ The Bank of England’s outlook is slightly less dire but it has still downgraded its third quarter GDP growth forecast from 0.4 per cent to 0.1 per cent.
