Britain’s economy is showing signs of stagnation as high inflation hits new orders and reports levels of concern that companies usually signal a recession, an industry survey closely watched Thursday said. Indicated.
S & P Global’s Purchasing Managers’ Index (PMI) targets service and manufacturing companies and also shows that a concern for the Bank of England is that companies are raising wages and passing higher costs on to their customers. ..
The PMI’s Interim Comprehensive Index, held at 53.1 in June, surpassed the median forecast of 52.6 in the Reuters economist poll and has not changed since May.
However, new order measurements dropped to 50.8, the lowest in over a year. Factory orders fell below the growth threshold of 50.0 to 49.6.
“The economy is starting to appear to be moving empty,” said Chris Williamson, chief business economist at S & P Global Market Intelligence.
“Corporate confidence has fallen to levels that have usually shown signs of an imminent recession in the past,” he said, adding that the economy showed a decline in production in the second quarter and a third quarter. He added that it could deepen.
Economics around the world are suffering from similar problems, with the pound sterling rising against the euro and the pound’s previous loss against the US dollar after similar research showed a sharp slowdown in business growth in a single currency area. I recovered a part of.
Some analysts said the report did not yet reflect the full impact of the cost of living crisis, but provided some hope that a recession might be avoided.
“For now, this study provides a reason to think the economy is a bit more resilient than we thought,” said Nicholas Farr, an economist at Capital Economics.
But others were worried about signs of slowing demand growth and still high inflationary pressures.
Samuel Tombs of Pantheon Macroeconomics said the UK economy is expected to shrink from April to June, partly due to the addition of holidays.
“We are still happy with the forecast that GDP in the second quarter will be down 0.7% quarter-on-quarter and will partially recover in the third quarter,” he said in a note to customers.
PMI’s Business Expectations Index fell 4.6 points in June. This is the largest monthly decline since the launch of the Covid-19 pandemic, with both manufacturers and service providers reporting the lowest levels of business optimism since May 2020.
Other data show the limits of Finance Minister Rishi Sunak to spend more money or cut taxes to stimulate the economy.
Inflation is also hitting consumer spending, and Confederation of British Industry figures show that retailers not included in the PMI survey have been hit this month.
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PMI’s job creation indicators were the strongest in the three months, the latest sign of labor market strength.
However, employers reported that it was difficult to find staff and wage levels had risen. This helped keep prices rising by companies near highs for nearly 20 years.
According to S & P Global, the entire enterprise felt the need to pass on higher energy, fuel and wage costs to its customers.
The BoE is concerned that the recent surge in inflation to 9.1%, the 40-year high in May, could be a permanent problem for the UK economy. Last week, he said he was ready to act “strongly” if there were signs of sustained inflationary pressure.