The UK’s economic growth prospects took a hit today as a key survey showed a sharp slow down in business output in September.
The latest S&P Global Flash UK PMI - a measure closely watched in the City - showed a reading of just 51 this month, down sharply from 53.5 in August. It was a much bigger fall than expected and points to faltering privater sector confidence at the start of the Autumn amid “a litany of worrying news.”
Readings above 50 point to growth while below that mark means contraction. Although it was the fifth consecutive month above 50, it was also the lowest reading since May.
Any indication of a slowing economy will make grim reading for Rachel Reeves as she prepares a likely tax raising Budget in November.
Manufacturing output was particularly weak with the fastest decline since March. Survey respondents cited weak order books from both domestic and export markets. There were also some specific mentions of lower manufacturing output across the automotive supply chain as a result of plant stoppages at Jaguar Land Rover.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence: “September’s flash UK PMI survey brought a litany of worrying news including weakening growth, slumping overseas trade, worsening business confidence and further steep job losses.
"The only good news is perhaps that, just as the Bank of England grows increasingly worried about persistently elevated inflation, the PMI indicated that price pressures have moderated in September. Companies reported one of the smallest increases in prices charged for goods and services seen since the pandemic.
"With the weakening of business activity growth to a rate consistent with the economy almost stalling, and around 50,000 job losses being signalled by the PMI again in the three months to September, alarm bells should be ringing that the economy is faltering, which could help shift the policy debate at the Bank of England back towards a more dovish stance.
"However, amid talk of further tax rises being needed in the Budget later this year, it’s not surprising to see that business expectations have worsened again in September, and in the absence of an improvement in confidence, it’s unlikely that the economy will make any strong gains in the months ahead irrespective of the outlook for interest rates.”
