UK’s economic landscape appears increasingly precarious, as evidenced by disappointing July PMI readings. Manufacturing PMI plunged to a 38-month low of 45.0, from 46.5 and underperforming expectation of 46.1. the Services PMI dipped to a 6-month low of 51.5, falling short of the anticipated 53.1, and down from 53.7. Composite PMI, encapsulating both sectors, dropped to a 6-month low of 50.7 from 52.8.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, expressed significant concern over these figures. “The UK economy has come close to stalling in July which, combined with gloomy forward-looking indicators, reignites recession worries,” he noted. “July’s flash PMI survey data revealed a deepening manufacturing downturn accompanied by a further cooling of the recent resurgence of growth in the service sector.”
Further bolstering this pessimistic outlook, forward-looking indicators, such as order book inflows, levels of work-in-hand, and future business expectations, suggest a potential weakening of growth in the coming months. Williamson warned, “these all point to growth weakening further in the months ahead, adding to a risk of GDP falling in the third quarter.”
While this decline in growth and demand paints a gloomy picture, there’s a silver lining in the form of cooling inflationary pressures. “Although ongoing upward wage pressures mean service sector price growth remains elevated, the survey data signal further, potentially marked, falls in consumer price inflation in the months ahead,” added Williamson.
