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UK business activity drops at fastest pace in two years as cost rises bite

Business activity contracted at its fastest pace in two years in December as the high cost of living restricted household spending and companies cut investment, raising the prospect of a UK recession.

by | 24 Jan, 2023

The services sector, which accounts for about three-quarters of private sector output, faced the biggest squeeze since the second Covid-19 lockdown, according to a closely watched survey. A slump in manufacturing output dating back to last August continued in December.

Illustrating the effects of high energy prices, rising interest rates and falling consumer demand, business reported “a sustained downturn” in new orders that meant they were churning through backlogs of old orders to maintain staffing levels.

The S&P Global/Cips flash purchasing managers’ index, which includes 80% of the survey’s responses from the services and manufacturing sectors, dropped below the level expected by City economists to 47.8 from 49 in December. A reading below 50 indicates activity contracted.

Chris Williamson, the chief business economist at S&P Global Market Intelligence, said industrial disputes, staff shortages, export losses, the rising cost of living and higher interest rates “all meant the rate of economic decline gathered pace again at the start of the year”.

He said: “Weaker than expected PMI numbers in January underscored the risk of the UK slipping into recession.”

Read more at The Guardian

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