 indicated that both services and manufacturing output fell far short of expectations. To the alarm of economists, this is despite bumper spending on restaurants and holidays during the summer. Yesterday's PMI index fell to a 33-month low of 47, from 50.8 in August. Anything below 50 is considered a shrinking of the economy. Excluding the hit from lockdowns, this is the steepest fall in output since the global financial crisis in 2008 . Chris Williamson, chief business economist at S&P Global Market Intelligence, said the dip 'indicates that the fight against inflation is carrying a heavy cost in terms of heightened recession risks'. The PMI survey showed that new orders by private companies had fallen to a nine-month low. The fall was blamed on 'sluggish' domestic economic conditions and higher interest rates that sparked caution among clients. The shock weakening in economic output has prompted money markets to dramatically rethink their expectations on interest rate rises. A week ago, it was expected the Bank of England would have to continue raising interest rates to 6 per cent in its efforts to tame inflation. However, these recession warnings have shocked economists, and traders are now betting interest rates will peak at 5.5 per cent. Analysts at Pantheon Economics said that the weak PMI data 'should convince the Bank to stop' raising rates. This will cause huge relief for homeowners who will face lower remortgaging costs later this year. Simon French, chief economist at Pan){kind=link}
GRIM economic figures have suggested the UK economy is teetering on the brink of a sharp recession as higher interest rates dent business activity.
A closely watched survey of manufacturers and the service industry showed a bigger than expected slump in activity – sparking fears that the economy is already weakening.
The S&P Purchasing Managers Index (PMI) indicated that both services and manufacturing output fell far short of expectations.
To the alarm of economists, this is despite bumper spending on restaurants and holidays during the summer.
Yesterday’s PMI index fell to a 33-month low of 47, from 50.8 in August.