Warning recession will hit UK after private sector’s worst hit in 2.5 years

Recession will hit the UK, a major bank has warned as Britons remain embattled on sides of the economy from interest rate hikes to inflation.

In a double-blow to the nation’s finances, August is witnessing a shocking decline of the UK’s private sector.

Lower new orders and higher borrowing costs have given the sector the unwelcome gift of its worst month in more than two years, furthering concerns the economy could enter a recession in a matter of months.

The pound has dropped 0.9 percent after the latest S&P Global/CIPS Flash UK purchasing managers’ index data, which showed output in the economy shrank for the first time in six months.

The UK purchasing managers’ index (PMI) fell to 47.9 in August, down from 50.8 in July.

This was the lowest reading for around two-and-a-half years.

Any reading above 50 is considered to show the sector is growing, while anything below represents a contraction.

The low reading was well below expectations from experts and comes as Citi said it expects the UK to fall into recession.

The investment bank warns that global growth next year will slow to below two percent from a lower than-expected 2.4 percent this year, caused by recessions in the UK and the US and a continuing slowdown in China.

Its analysts said: “We characterise this outlook as “soft” but still a notch stronger than a full-blown global recession.”

They added that any changes in the forecast will probably be “skewed to the downside”.

On their Twitter account, the S&P Global PMI tweeted: “August flash #PMI data signalled the first contraction in the #UK private economy since January (PMI at 47.9; Jul: 50.8). Lower levels of activity were recorded in both the manufacturing and service sectors.

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Chris Williamson, chief business economist at S&P Global said: “Companies are reporting reduced orders for goods and services as demand is increasingly hit by the cost-of-living crisis, higher interest rates, export losses and concerns about the economic outlook.

“Although cost pressures remain elevated, thanks mainly to rising wages, the deteriorating demand environment is curbing companies’ pricing power.”


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