Future Retirement Success
  • Politics
  • Business
  • Investing
  • Stocks
  • Politics
  • Business
  • Investing
  • Stocks

Future Retirement Success

Business

UK faces ‘heightened recession risks’ as interest rates bite

by August 24, 2023
August 24, 2023
UK faces ‘heightened recession risks’ as interest rates bite

The UK economy is on course to shrink between July and September and could tip into recession, a closely-watched survey suggests.

The S&P Global/CIPS UK Purchasing Managers’ Index (PMI) found that rising interest rates and weaker household spending led to a sharp drop in demand for goods and services in August.

The index looks at key economic measures such as orders and employment.

It showed that activity shrank in August after six months of growth.

The index’s reading of 47.9 this month – anything below 50 marks a contraction – is the lowest level in two and half years.

On the upside, economists said that the PMI figures, which measure the health of an economy, showed that the Bank of England’s efforts to tame inflation were beginning to work.

Following the release of the PMI report, the pound fell against the dollar and City analysts lowered their expectations of where the interest rate would peak to 5.5% from 6%.

Interest rates currently stand at 5.25% following a succession of increases since late 2021 when it was close to zero.

However, Chris Williamson, chief business economist at S&P Global Market Intelligence, said the figures also suggested “the fight against inflation is carrying a heavy cost in terms of heightened recession risks”.

“A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival,” he said.

According to official figures, UK inflation was 6.8% in July which, although slower than the previous month, is still more than three times higher than the Bank of England’s 2% target.

The Bank’s Monetary Policy Committee has voted 14 times in a row to raise interest rates. The theory is that by making it more expensive to borrow money, consumer demand will cool and price rises will slow.

However, repeated interest rate rises tend to drag on economic growth as it becomes more expensive for consumers and businesses to borrow and spend. Companies may also cut back on investment and jobs.

Paul Dales, economist at Capital Economics, said the survey would encourage the Bank “that higher rates are working” but added that economic activity would soon contract and a “mild recession is on the way”.

According to the PMIs, UK activity fell in both the manufacturing and services sectors in August.

Rhys Herbert, a senior economist at Lloyds Bank, added that “the sharper-than-expected drop in retail sales in July” was also a warning of “further possible weakness as we enter autumn”.

“Some businesses continue to also experience challenges with recruitment, resulting in upward pressure on wages,” Mr Herbert added.

Pay has been rising at a record rate but the Bank of England has warned that wage increases will make it harder to get inflation down.

Read more:
UK faces ‘heightened recession risks’ as interest rates bite

0
FacebookTwitterGoogle +Pinterest
previous post
Small businesses postponing investment plans as they cope with higher costs
next post
Post Office boss set to return bonus after Horizon scandal

You may also like

How can businesses best walk the green walk?

June 20, 2024

At What Stage in the Business Will You...

February 24, 2023

How to Blur License Plates in Photos

February 19, 2024

Firstgroup quietly ends long-running employee director policy

June 12, 2025

Tourist Tax Diverts Wealthy Visitors from London to...

June 6, 2024

Elon Musk loses title of world’s richest person...

December 14, 2022

Inflation Expected to Stabilise at 2% in 2024,...

April 20, 2024

The growth of the smartphone apps business and...

January 31, 2023

HSBC buys Silicon Valley Bank’s UK business for...

March 13, 2023

Gas drilling in Jeremy Hunt’s Surrey constituency given...

January 10, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free

    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Trump Clashes With Reporter Over Tariffs, Citing Pandemic and ‘Fighting Lunatics’

      August 1, 2025
    • Longtime Biden aide testifies he stood to earn up to $8M had president won re-election

      August 1, 2025
    • Secret Service must ‘course correct’ after alleged smuggling episode on Trump trip, former agent says

      August 1, 2025
    • GOP senators rally around effort to end ‘radical wokeness’ in HHS task force

      July 31, 2025
    • Banned chemicals found in American shampoo, sunscreen and tampons across major brands

      July 31, 2025
    • Homesick GOP senators mull throwing out the rules over stonewalling Dems

      July 31, 2025

    Categories

    • Business (8,637)
    • Investing (2,165)
    • Politics (16,271)
    • Stocks (3,228)
    • About us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: futureretirementsuccess.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 futureretirementsuccess.com | All Rights Reserved