UK Recession 'Continues', Key Survey Finds

A closely-watched survey of the UK economy indicates that the recession continued between April and June.

Ahead of the release of the official GDP figures for the second quarter of 2012 later this month, the Markit/CIPS Purchasing Managers Index (PMI) helps economists determine how the key manufacturing, construction and services sectors are performing.

After taking in its findings for June, Markit calculates that the UK economy contracted by 0.1% in the quarter.

While that would be an improvement on the 0.3% negative growth figure in the first quarter, it would represent three consecutive quarters of contraction for UK GDP.

The data is monitored by the Bank of England and makes it even more likely the Monetary Policy Committee will look to boost money supply in the economy further through its programme of quantitative easing (QE) on Thursday.

The Sky News Money Panel is expecting a QE rise of £50bn to £375bn.

The PMI data for the services sector, which represents almost 75% of the economy, released on Wednesday indicated that activity was at an eight-month low - hovering just above contraction itself.

What will again worry policymakers is that the small amount of growth monitored was down to existing orders.

Chris Williamson, chief economist at Markit, said: "The services economy saw one of its worst months since the recovery began three years ago, with the June survey showing signs of growth stalling."

He continued: "The services PMI probably cements the case for further stimulus from the Bank of England."

News over the past two days on activity within the construction and manufacturing sectors was grim, even compared to that for the services sector.

Construction activity, Markit said, fell at its fastest rate in two-and-a-half years during June while manufacturing contracted for the second month running.

The figures have left economists scrambling to determine when the future looks brighter.

While the bank holidays for the Diamond Jubilee - and poor weather - are thought to have damaged output in the second quarter, a small bounce is expected in the following three months from the 2012 Olympic Games.

Falling inflation is also having a positive effect on prices but the PMI survey suggests businesses remain reluctant to hire more staff because of the uncertainty over the wider economy, particularly in the eurozone.