{"id":248235,"date":"2023-08-24T15:00:03","date_gmt":"2023-08-24T15:00:03","guid":{"rendered":"https:\/\/www.bnreport.com\/?p=248235"},"modified":"2023-08-24T12:56:21","modified_gmt":"2023-08-24T12:56:21","slug":"uk-economy-poised-for-contraction-as-rates-rise","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/uk-economy-poised-for-contraction-as-rates-rise\/","title":{"rendered":"UK Economy Poised for Contraction as Rates Rise"},"content":{"rendered":"<p style=\"text-align: justify;\"><a href=\"https:\/\/www.bnreport.com\/en\/\"><strong>BNR<\/strong><\/a> \u2013 The United Kingdom\u2019s economy seems to be going for a contraction or a potential recession in the July-September period.<\/p>\n<p style=\"text-align: justify;\">The S&amp;P Global\/CIPS UK Purchasing Managers\u2019 Index (<a href=\"https:\/\/www.investopedia.com\/terms\/p\/pmi.asp\">PMI<\/a>) revealed a sharp drop in demand for goods and services in August. The drop is caused by the combined impact of rising interest rates and reduced household spending.<\/p>\n<h1 style=\"text-align: left;\"><strong>Lowest PMI Reading in 2.5 Years<\/strong><\/h1>\n<p style=\"text-align: justify;\">The PMI has registered a reading of 47.9 for this month. It is a key barometer of economic health that assesses metrics including orders and employment.<\/p>\n<p style=\"text-align: justify;\">Any figure below 50 indicates a contraction, and this latest reading represents the lowest level recorded in 2.5 years. This decline comes after a six-month period of growth.<\/p>\n<p style=\"text-align: justify;\">While the survey points to economic challenges, economists have noted some positive aspects. The PMI figures underscore the effectiveness of the <a href=\"https:\/\/www.bankofengland.co.uk\/\">Bank of England<\/a>\u2019s attempts to curb inflation.<\/p>\n<p style=\"text-align: justify;\">Consequently, the pound dipped against the dollar and analysts in the City revised their interest rate expectations to a peak of 5.5%, down from the earlier projection of 6%.<\/p>\n<p style=\"text-align: justify;\">Currently, interest rates stand at 5.25%, following a series of increases since late 2021 when they were close to zero.<\/p>\n<p style=\"text-align: justify;\">Nonetheless, the PMI report also highlights the potential downside of the fight against inflation.<\/p>\n<h2 style=\"text-align: left;\"><strong>Efforts to Control Potential Economic Contraction<\/strong><\/h2>\n<p style=\"text-align: justify;\">Chris Williamson, chief business economist at S&amp;P Global Market Intelligence, emphasised that the efforts to control inflation could lead to heightened recession risks.<\/p>\n<p style=\"text-align: justify;\">The PMI\u2019s findings resonate with broader economic trends, with both the manufacturing and services sectors experiencing declines in August.<\/p>\n<p style=\"text-align: justify;\">The report further cites challenges with recruitment faced by some businesses, exerting upward pressure on wages.<\/p>\n<p style=\"text-align: justify;\">Rhys Herbert, senior economist at Lloyds Bank, said the decrease in retail sales is a warning sign of autumnal weakness. She further added that lingering recruitment difficulties could continue to impact economic dynamics.<\/p>\n<p style=\"text-align: justify;\">Also, the Bank of England\u2019s commitment to raising rates raises questions about the balance between price rises and economic growth.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>BNR \u2013 The United Kingdom\u2019s economy seems to be going for a contraction or a potential recession in the July-September period. The S&amp;P Global\/CIPS UK Purchasing Managers\u2019 Index (PMI) revealed a sharp drop in demand for goods and services in August. The drop is caused by the combined impact of rising interest rates and reduced [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":248236,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[207],"tags":[12375,278,1165,11887,12376],"class_list":["post-248235","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-world","tag-contraction","tag-featured","tag-inflation","tag-recession","tag-uk-economy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>UK Economy Poised for Contraction as Rates Rise - Business News Report<\/title>\n<meta name=\"description\" content=\"BNR \u2013 The United Kingdom\u2019s economy seems to be going for a contraction or a potential recession in the July-September period.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bnreport.com\/en\/uk-economy-poised-for-contraction-as-rates-rise\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"UK Economy Poised for Contraction as Rates Rise - 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