Signs of stagnation in the British economy

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The British economy is showing signs of stagnation as high inflation hits new orders and businesses report a level of concern that usually signals a recession, according to the PMI survey.

In particular, the composite PMI of S&P Global Purchasing Managers (business and manufacturing) remained unchanged at 53.1 points in June, higher than the average estimates for 52.6 points.

The index also showed that companies are raising wages and passing on higher costs to customers, a factor of concern to the Bank of England.

The PMI for new orders remained virtually stagnant as it fell to 50.8 points, the lowest level in the last year.

Factory orders also fell below the 50-unit threshold to 49.6.

“Business confidence has now fallen to a level that in the past usually signaled an immediate downturn,” said Chris Williamson, chief economist at S&P Global Market Intelligence.

He added that the economy is likely to see a drop in production in the second quarter, which could deepen in the third quarter.

The PMI business expectation index fell 4.6 points in June, the biggest monthly drop since the pandemic began, with service and manufacturing companies announcing the lowest levels of business optimism since May 2020.

The Bank of England is watching for signs that the recent rise in inflation to a 40-year high in May could be a permanent problem for the British economy.

Source: Capital

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