U.K. PMIs reveal risk of recession, placing pressure on BoE
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With Tuesday's release of the U.K.'s construction purchasing managers' index (PMI) for July, Markit chief economist Chris Williamson warned that Britain ran the risk of a recession, putting pressure on the Bank of England to come up with new stimulus measures.
Data released on Tuesday showed that construction sector activity in the U.K. slipped further into contraction. 'If the construction PMI is combined with the final manufacturing and the flash services PMI, the ‘all sector' PMI will have sunk to 47.3 from 51.9,' Williamson said in a separate commentary on the report. 'As well as the surveys potentially signaling the steepest fall in business activity since April 2009, the possible turnaround in the index (4.6 point drop) would be the largest ever deterioration recorded since the surveys began in 1997,' he added.
Williamson pointed out that the final services PMI will be released on Wednesday and noted that he remained cautious on reading too much into the survey considering the intensity of the political and economic uncertainty following the U.K.'s decision to leave the European Union. Still, he warned that 'the data raise the prospect of the economy sliding into decline in the third quarter and entering recession.' Williamson remarked that the Bank of England (BoE) was likely to cut interest rates to at least a record low of 0.25% on Thursday, as well as discuss the possibility of further non-standard measures. 'Pressure has mounted, however, for policymakers to show new creativity in finding ways to stimulate demand,' Williamson concluded.
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With Tuesday's release of the U.K.'s construction purchasing managers' index (PMI) for July, Markit chief economist Chris Williamson warned that Britain ran the risk of a recession, putting pressure on the Bank of England to come up with new stimulus measures.
Data released on Tuesday showed that construction sector activity in the U.K. slipped further into contraction. 'If the construction PMI is combined with the final manufacturing and the flash services PMI, the ‘all sector' PMI will have sunk to 47.3 from 51.9,' Williamson said in a separate commentary on the report. 'As well as the surveys potentially signaling the steepest fall in business activity since April 2009, the possible turnaround in the index (4.6 point drop) would be the largest ever deterioration recorded since the surveys began in 1997,' he added.
Williamson pointed out that the final services PMI will be released on Wednesday and noted that he remained cautious on reading too much into the survey considering the intensity of the political and economic uncertainty following the U.K.'s decision to leave the European Union. Still, he warned that 'the data raise the prospect of the economy sliding into decline in the third quarter and entering recession.' Williamson remarked that the Bank of England (BoE) was likely to cut interest rates to at least a record low of 0.25% on Thursday, as well as discuss the possibility of further non-standard measures. 'Pressure has mounted, however, for policymakers to show new creativity in finding ways to stimulate demand,' Williamson concluded.