UK private sector output falls at fastest rate since early 2021: survey

People walk past a shop in Manchester, Britain, May 11, 2023. (Photo by Jon Super/Xinhua)

The S&P Global/CIPS Flash UK PMI Composite Output Index stood at 47.9 in August, down from 50.8 in July, representing a 31-month low. It was below the neutral 50 threshold for the first time since January.

LONDON, Aug. 24 (Xinhua) -- The private sector output of the United Kingdom (UK) has been falling at the fastest rate since January 2021, a business survey showed on Wednesday.

The S&P Global/CIPS Flash UK PMI Composite Output Index stood at 47.9 in August, down from 50.8 in July, representing a 31-month low. It was below the neutral 50 threshold for the first time since January.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the PMI data suggests that UK inflation should moderate further in the coming months. Nevertheless, the fight against inflation carries a heightened risk of recession.

Williamson noted that "a renewed contraction of the economy already looks inevitable," adding that the survey is indicative of GDP declining by 0.2 percent over the third quarter so far.

A man walks past a shop in Manchester, Britain, May 11, 2023. (Photo by Jon Super/Xinhua)

The survey showed the PMI readings of services and manufacturing sectors both fell in August. The services sector PMI dropped from 51.5 to 48.7 in August, a seven-month low. Meanwhile, the manufacturing PMI reading fell to 42.5 in August, a 39-month low.

"Companies are reporting reduced orders for goods and services as demand is increasingly hit by the cost-of-living crisis, higher interest rates, export losses and concerns about the economic outlook," said Williamson.

UK households have been in the grip of high inflation for more than a year. Against this background, the Bank of England (BoE) raised the interest rate 14 times in a row since December 2021. The bank rate currently stands at 5.25 percent, the highest in 15 years.

UK inflation rate was 6.8 percent in July, the lowest since February 2022, falling from the peak of 11.1 percent in last October. However, it is still far above BoE's 2 percent target.

Fruits are seen in a market in Manchester, Britain, May 11, 2023. (Photo by Jon Super/Xinhua)

Williamson expects the inflation to drop to 4 percent in the months ahead. The BoE will hike the rates again in September, but rates will likely peak soon, he said. ■