Britain dodged a recession last year despite a historic energy price shock and an investor revolt that forced out the prime minister. Recent data have raised questions about whether it will be so lucky this time around.
Surveys of purchasing managers and retailers both point toward a sudden slowdown in recent weeks. More companies are taking steps to address financial distress. Even the jobs market, which remained strong through the pandemic, is showing signs of weakening.
That’s bad news for Prime Minister Rishi Sunak, who took power last year pledging to cut inflation and restore growth after opposition to a tax-cut heavy budget plan by his predecessor, Liz Truss, led her to resign. Sunak’s Conservatives are trailing the opposition Labour Party by double digits in advance of an election Bloomberg News has reported is penciled in for November of next year.
Such views have been bolstered by forward-looking indicators suggesting a deterioration in conditions since the BOE published its most recent forecast on Aug. 3. The monthly purchasing manager index unexpectedly contracted in August, falling to 47.9 from 50.8 the previous month. The measure had been above 50, a level that indicates expansion, since February.“The UK avoided recession in the first half of 2023. The sharp fall in the PMI between June and August has raised the downside risks.
The UK delivered its strongest quarterly growth in more than a year in the three months that ended in June, in a surprising show of resilience. Consumer confidence also rebounded this month, market research company GfK said Friday, as inflation showed signs of cooling and strong wage growth buoyed household finances.
A survey from the Confederation of British Industry indicated that August retail sales fell at the fastest year-on-year rate since March 2021, when the nation was in a Covid-19 lockdown. The outlook is for a further deterioration in the next three months, with retailers investing less and employing fewer people.
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