IT is now “touch and go” whether the UK will avoid a recession, and the Bank of England may have to cut interest rates sooner than it planned.
After dire figures from the manufacturing and construction sectors this week, the huge services sector joined in the gloom. The IHS Markit/CIPS PMI data fell for 49.5 in September from 50.6 the month before.
Any number below 50 indicates a contraction in economic growth.
Chris Williams at IHS said: “A trio of grim reports on the economy means that the vast service sector has now joined manufacturing and construction in decline.”
Duncan Brock at CIPS said: “Momentum and optimism were in woefully short supply in September.”
IHS now thinks UK GDP will fall by 0.1% in the third quarter. On top of a 0.2% decline in the second quarter, that would be enough to put the country into recession.
The latest figures show a worrying drop in hiring activity, with projects delayed or cancelled.
The Bank of England has been delaying a cut in interest rates until after the Brexit impasse in Westminster is resolved, but may now have no choice if it wants to add stimulus to the economy.
Simon French at broker Panmure Gordon said: “Today’s Services PMI shows that it will be touch and go whether the UK avoids a recession in the third quarter.
“We still think there is sufficient momentum in hiring and in consumer spending — as well as Brexit stockpiling — to avoid a second successive quarter of negative growth. However the longer term outlook has darkened. A no-deal Brexit, a general election and a broad-based trade war are all weighing on confidence.”
