Yahoo Finance UK economy 'stalling' over poor demand and high prices
Business activity plagued by slowdown across the private sector as economic outlook remains uncertain
Business activity growth saw a "considerable slowdown" across the UK's private sector as data for July's PMI index saw output levels at the weakest for six months.
This was largely due to flatlining new orders and sharply reduced backlogs of work, according to the S&P Global/CIPS Flash United Kingdom PMI release.
The index registered 50.7 in July, down from 52.8 in June and the lowest reading since January. A reading above 50 indicates overall growth.
Survey respondents commented on a headwind to business activity from rising interest rates, elevated inflation, and more caution among clients due to the uncertain economic outlook.
Meanwhile, it was positive news for supply chains, which had been choked during the pandemic. Manufacturing companies reported the biggest improvement in suppliers’ delivery times since the index began in January 1992. The normalisation of global supply chains helped to boost vendor performance and bring down cost pressures.
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As a result, manufacturers reduced their output charges for the second month running. Across the UK private sector as a whole, the latest round of prices charged inflation was the slowest for nearly two-and-a-half years.
"The UK economy has come close to stalling in July which, combined with gloomy forward-looking indicators, reignites recession worries," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "“Forward-looking indicators, such as order book inflows, levels of work-in-hand and future business expectations, all point to growth weakening further in the months ahead, adding to a risk of GDP falling in the third quarter."
The numbers show a slowdown from June's reading, which showed inflation taking its toll. The index showed growth in output at a three-month low, with a reading of 52.8. While there was an upturn in the service economy, the manufacturing sector was still in contraction in June, with a reading of 47.7, unchanged from May.
June data also highlighted contrasting inflationary pressures in the manufacturing and service sectors. Manufacturing companies signalled an outright reduction in factory gate charges for the first time in more than seven years.
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