AN economist has warned the UK is facing “heightened recession risks” after the private sector suffered a shock downturn in August.
It comes on the back of high borrowing costs and represented the first monthly decline since January as firms were struck hard by recent interest rate hikes,The closely followed S&P Global/CIPS Purchasing Managers’ Index fell to 47.9 in August, down from 50.8 in July – marking the lowest reading for around two-and-a-half years.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The early PMI survey for August suggests that inflation should moderate further in the months ahead, but also indicates that the fight against inflation is carrying a heavy cost in terms of heightened recession risks.already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival.
Across all industries, new orders fell for the second consecutive month as surveyed firms “cited a reluctance to spend among clients in the wake of higher interest rates and stretched disposable household incomes”. “High interest rates are starting to have their intended effect of dampening demand and reducing inflationary pressures, leading to moderated input costs and reduced raw material prices for manufacturers.”Martin Beck, chief economic advisor to the EY Item Club, said: “This combination of a slowdown in both activity and inflation should give the Bank of England food for thought in advance of its next interest rate decision in September and suggests an increase is no longer a certainty.
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