Yahoo Finance UK economy grinds to a near halt on the back of dwindling customer demand
The UK economy almost ground to a halt in August as factory output fell and growth in the larger services sector slowed, according to the latest survey of purchasing managers at UK firms.
The S&P Global/CIPS flash UK composite purchasing managers index (PMI) report showed a reading of 50.9 for August, declining from 52.1 last month. Anything above 50 is considered growth.
Manufacturing dragged down the index with the slowest activity in 27 months, while the services sector expanded at the slowest pace in 18 months.
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Factories blamed reduced customer demand, the delayed delivery of inputs and labour shortages.
The Flash UK manufacturing PMI sank to just 46.0, a 27-month low, down from 52.1.
Annabel Fiddes at S&P Global 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.
“The tightening of financial conditions via interest rate hikes, the cost of living crisis, labour shortages and strained supply chains are all likely to dampen economic performance further and keep costs elevated in the months ahead.”
Growth eased again in UK with the flash #PMI at an 18-month low of 50.9 (Jul: 52.1). Demand was impacted by economic uncertainty and high costs while employment growth also moderated. Read more: https://t.co/P4mdA0F04B pic.twitter.com/AUhinzpGgI
— S&P Global PMI™ (@SPGlobalPMI) August 23, 2022
Matthew Ryan, head of Market Strategy at Ebury, added: “This morning’s UK PMI data was very much a mixed bag, with a sharp slowdown in manufacturing activity (to 46.0 in August) offsetting the stronger-than-expected services index (52.5 vs. 52.0 consensus). For now, the composite PMI continues to print above the key level of 50, although only barely, and it surely won’t be too long before we see this indicator tip into contractionary territory.
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“The UK’s cost of living crisis is set to get worse before it gets better, and with energy prices continuing to march to fresh highs, it seems increasingly likely that a sharp slowdown, and a potentially protracted recession, may be on the horizon.”
The latest survey of UK factories by the CBI has confirmed that the sector is slowing. British industrial output fell over the past three months for the first time since February 2021, according to the CBI’s ‘industrial trends’ report.
Firms also reported a drop in new business, with the order book balance hitting its lowest since April 2021.
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