UK private sector output falls at fastest pace in two-and-a-half years
Sharecast
Published Aug 23, 2023 11:04
UK private sector output falls at fastest pace in two-and-a-half years
Sharecast - The S&P Global/CIPS flash composite output index declined to 47.9 from 50.8 in August, coming in below the 50.0 mark that separates contraction from expansion for the first time since January and marking a 31-month low.
Private sector firms put this down to a faster fall in new orders as sluggish domestic economic conditions and higher borrowing costs made clients cautious.
The services PMI business activity index fell to 48.7 in August from 51.5 in July, while the manufacturing PMI declined to 42.5 from 45.3, hitting its lowest level in 39 months.
John Glen, CIPS chief economist, said: "High interest rates continue to cast a shadow over the UK economy, creating a lull in new orders, stunting output, and ensuring prospects for the private sector remain uncertain.
"This reduction in activity has provided UK supply chains with much-needed respite after the instability of the last two years. High interest rates are starting to have their intended effect of dampening demand and reducing inflationary pressures, leading to moderated input costs and reduced raw material prices for manufacturers. Businesses who had built up stock as a safety net against disruption have now reduced their inventories and created more balanced and efficient supply chains as a result.
"The hope is that more predictable supply chains will help to stabilise the economy and support an eventual rebound in new orders. However, the question remains as to how long elevated borrowing costs will limit demand."
After the release, sterling was trading down 0.4% against the dollar at 1.2685.
Paul Dales, chief UK economist at Capital Economics, said: "The fall in the activity PMI to below the boom-bust level of 50.0 in August and the further drop in the prices balances probably won’t prevent the Bank of England from raising interest rates from 5.25% to 5.50% in September, but it will encourage it that higher rates are working."
Read more on Sharecast.com
Get The App
Written By: Sharecast
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.