Slumping output in the UK manufacturing sector adds more gloom to the already worsening economy. Last month the manufacturing sector suffered its biggest drop in output since records begin in the early 1990s.
George Buckley, one economist at Deutsche Bank in London, said: “Today’s manufacturing data was shockingly weak. The headline, output, new orders, employment and purchases indices all fell to their lowest on record with respondents citing the ongoing turmoil in the housing and credit markets as the reason.”
The Office for National Statistics (ONS) said output in the services sector had not grown in the 3 months leading to July. This was the worst performance in 6 years and the services sector accounts for approximately 70% of the economy. Britain’s construction industry is heading toward a 3-year slump after 13 years of unprecendented growth.
“Today’s data on the UK’s manufacturing and services sectors provided the clearest signal yet that GDP contracted in Q3. In effect, the UK economy may already be in recession,” said Paul Dales of Capital Economics.
The signs of a recession are written all over the walls. City economists met up at the Bank of England to discuss these recent figures and admitted after the meeting the outlook was “grim”. Most expect a rate cut at the next MPC meeting in less than a week.
The possibility of rates dropping to 4% by next summer is very real.
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