UK economy continues to falter as new orders tumble

by | Nov 23, 2022

The UK economy continued to struggle in November, a closely-watched survey showed on Wednesday, as the cost of living crisis weighed heavily.
The latest S&P Global/CIPS UK PMI Composite Output Index came in at 48.3, broadly unchanged on October’s 48.2. It was, however, above consensus, for around 47.5.

Within that, the manufacturing output index nudged only marginally higher at 45.4, from last month’s 45.0, while manufacturing PMI was unchanged at 46.2. The services PMI business activity index was also unchanged, at 48.8.

A reading above 50.0 indicates growth, while a reading below it indicates contraction.

New orders fell at the sharpest pace for almost two years, as squeezed client budgets hit demand in both manufacturing and services.

Business expectations for the ahead did improve, however, coming off October’s 30-month low. Respondents remained concerned about recession and the increasingly difficult economic conditions, but there were fewer comments about domestic political uncertainty.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “A further steep fall in business activity in November adds to growing signs that the UK is in recession.

“If pandemic lockdown months are excluded, the PMI for the fourth quarter so far is signalling the steepest economic contraction since the height of the global financial crisis in the first quarter of 2009.

“While the recent change of government has resulted in improvement business confidence, the business mood remains among the gloomiest seen over the past quarter century.”

John Glen, chief economist at the Chartered Institute of Procurement & Supply, said: “There was barely a discernible light at the end of the tunnel for private sector businesses in November, as they remined in contraction for the fourth month in a row as a result of higher inflation, borrowing costs and energy bills.

“The survey pointed to some deeply concerning developments, such as the quickest fall in new orders since January 2021 and the fastest decline in manufacturing export orders since 2009 outside the pandemic years.

“The Covid veil, now almost completely lifted, has revealed the challenges still faced by exporters struggling with customs and paperwork challenges and other Brexit constraints putting off overseas customers.”

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: “November’s composite PMI continues to point to a recession, despite the recent decline in political and fiscal uncertainty. Indeed, [it] remains consistent with a quarter-on-quarter contraction in GDP of around 0.2% in the fourth quarter, following the third quarter’s 0.2% decline.”

Survey data was collected between 11 and 21 November.

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