Sterling is looking unhealthy due to fears of recession (Dominic Lipinski/PA)
(Picture: PA Wire)The pace of Britain’s gathering economic crisis was underlined today by a slowdown in business activity as sterling fell once again and wholesale energy prices remained close to record highs.
The benchmark composite PMI indicator fell in August to 50.9, from 52.1 in July, with manufacturing particularly weak at 46. The services sector held up better with the index slipping only from 52.6 to 52.5. A reading of 50 points is equivalent to no growth.
Dr John Glen, chief economist at CIPS, which helps compile the PMI data, said: “A disappointing pace of business activity growth across the private sector, with the weakest rise in output levels for a year-and-a-half and the headline index moved another step closer to the no-change 50.0 mark.”
Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said: “The UK private sector moved closer to stagnation in August, as mild growth of activity across the service sector only just offset a deepening downturn at manufacturers.
“Waning customer demand amid the weaker economic outlook, and shortages of both staff and inputs, were reported to have hit goods producers hard, with firms registering the quickest drops in output and new work since May 2020.”
The PMI figures are consistent with the Bank of England’s forecasts that the economy will slide into recession in the autumn and remain in contraction mode throughout 2023.
Meanwhile the pound came under further pressure with sterling flirting with fresh two-and-a-half year lows against the dollar, regarded as a safe-haven in troubled times.
The pound, which was at $1.40 a year ago, fell again today in early trading and at one stage was another half cent down against the dollar at 1.1724, although it later recovered some ground.
Paul Dales at forecaster Capital Economics, said: “Overall, we suspect today’s PMI figures will be ringing the recession alarm bell before long. But with inflationary pressures still very intense, the Bank of England will have little choice but to continue raising interest rates, from 1.75% now to 3.00%.”
Wholesale energy markets continued their upward direction with gas October contract trading on London’s ICE energy exchange at about 590p a therm.
Fears over Europe’s supply of gas remained high after Russia’s state-run exporter Gazprom said it would close its Nord Stream pipeline into Germany for three days of maintenance in late August or early September. The pipeline’s capacity has already been reduced by about a fifth, with Moscow blaming faulty equipment and delayed repairs.
