UK business activity declines amid cost pressures, waning demand
UK business activity fell in September at the fastest rate since January 2021, as cost pressures and waning demand took their toll, according to a survey released on Friday.
The flash S&P Global CIPS composite purchasing managers’ index - which measures activity in the services and manufacturing sectors - declined to 48.4 from 49.6 in August, coming in below consensus expectations of 49.0. A level above 50 indicates expansion, while a reading below signals contraction.
The services PMI fell to 49.2 in September from 50.9 a month earlier, while the PMI for the manufacturing sector printed at 48.5, up from 47.3.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "UK economic woes deepened in September as falling business activity indicates that the economy is likely in recession. Companies report that the rising cost of living, linked to the energy crisis, and growing concerns about the outlook are subduing demand and hitting output levels to an extent not seen since 2009, barring the pandemic lockdowns and initial 2016 Brexit referendum shock.
"Forward-looking indicators meanwhile deteriorated further in September. Both the new orders and future expectations gauges have descended to levels which have rarely been weaker in the past, and are consistent with a deepening downturn as we head into the fourth quarter. “Inflationary pressures continue to run higher than at any time in over two decades of survey history prior to the pandemic. Renewed supply constraints, soaring energy prices and rising import costs associated with the weakened pound are adding to cost pressures, meaning the overall rate of inflation signalled will remain of great concern to policymakers at the Bank of England."
He added that the detrimental impact of tightening policy into a recession is becoming increasingly apparent, with the downturn likely to intensify as we head into winter.