A recession 'is looking extremely likely' as the UK private sector has taken a bigger hit than expected this month, with new data showing it's hit its worst performance since lockdown in early 2021. New data shows the S&P Global/CIPS flash UK purchasing managers' index has dropped to 46.8 in September, down from 48.6 in August. The Bank of England and the Treasury closely monitor the economy's activity as a high-frequency gauge. The data, among other things, is often used when setting interest rates. It does this by assigning a score to a sector, with any score below 50 thought to show contraction. The faster you get away from 50, the harder it will be to decrease.
Economists expected the private sector to continue to contract, but not by this much. Although the manufacturing sector is struggling more than the services sector, the gap narrowed this month. The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of more than 0.4 percent, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement. The worsening situation in September is the steepest since the height of the global financial crisis in early 2009, barring only the pandemic lockdown months.
On Thursday, the Bank of England downgraded its forecast for the UK's economy. It had previously expected 0.4 percent growth in the third quarter of this year, but this was revised to 0.1%.