UK private sector firms suffered their first contraction in seven months, revealing the growing economic toll of higher interest rates and the squeeze on households.
S&P Global said its composite purchasing managers’ index slipped from a score of 50.8 to 47.9 in August, the lowest in 31 months. The scale of the downturn will come as a surprise to economists, who had expected only a modest slowdown with activity remaining above the 50 level dividing expansion from contraction.
The figures will strengthen the case for the BOE to call time on its most aggressive monetary tightening in over three decades. While money markets are currently pricing in a peak of around 6%, the BOE did not predict a third-quarter contraction in its latest forecasts. Instead, it expected a 0.4% expansion as the economy bounced back from days lost to the coronation of King Charles III and labor strikes.
“While a further hike in interest rates in September looks to be on the cards, the August PMI data will add to speculation that rates could soon peak.” The darkening economic backdrop piles further pressure on Prime Minister Rishi Sunak, whose Conservative Party trails far behind the Labour opposition in opinion polls ahead of a general election widely expected next year.
France Dernières Nouvelles, France Actualités
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