September 4, 2019 / 8:34 AM / 11 days ago

Brexit-worn Britain looks on track for recession -PMI

LONDON, Sept 4 (Reuters) - Britain’s economy is in serious danger of entering its first recession since the financial crisis as business confidence wilts in the Brexit crisis, a closely watched business survey showed on Wednesday.

Growth in Britain’s dominant services sector slowed to a crawl in August and business expectations were at their lowest in more than three years, according to the IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI).

Its headline reading fell to 50.6 from 51.4 in July — barely above the 50 barrier between growth and contraction. A Reuters poll of economists had pointed to a reading of 51.0.

The survey is likely to add to questions over Britain’s ability to bounce back from an economic contraction in the second quarter when a hangover from the stockpiling boom before the original Brexit deadline in March hit output.

PMI compiler IHS Markit said the overall economy looked on track to shrink again in the July-September period at a quarterly rate of 0.1% — a result that would officially herald a recession.

“After surveys indicated that both manufacturing and construction remained in deep downturns in August, the lack of any meaningful growth in the service sector raises the likelihood that the UK economy is slipping into recession,” IHS Markit chief business economist Chris Williamson said.

“While the current downturn remains only mild overall, the summer’s malaise could intensify as we move into autumn.”

The survey’s gauge of optimism in the services sector fell to its lowest level since July 2016, the month just after the Brexit vote, while growth in new orders slowed sharply.

“Overall jobs growth has meanwhile also ground to a halt as worries about deteriorating order books and the gloomier outlook took their toll on firms’ appetite to hire, pointing to a weakening labour market and adding to the darkening outlook,” Williamson said.

Some economists say surveys like the PMIs tend to overstate the extent of upturns and downturns, but they are nonetheless closely watched by the Bank of England as early indicators of moves in the wider economy.

BoE Governor Mark Carney and other members of the Monetary Policy Committee are due to answer questions from lawmakers at 1315 GMT.

- Detailed PMI data are only available under licence from IHS Markit and customers need to apply for a licence.

To subscribe to the full data, click on the link below: here

For further information, please phone IHS Markit on +800 6275 4800 or email economics@ihsmarkit.com (Reporting by Andy Bruce; Editing by Catherine Evans)

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