Economic downturn deepens and job losses accelerate in September
The health of the UK economy continued to deteriorate in September with the PMI surveys indicating the second-largest monthly fall in business activity seen since the global financial crisis, pointing to a second successive quarterly drop in GDP. The downturn has now spread to all three main sectors of the economy, leading to the largest monthly loss of jobs since 2009. Price pressures have also waned amid a further marked drop in demand for goods and services.
Economy at risk of recession
The seasonally adjusted IHS Markit/CIPS ‘all-sector’ PMI fell from 49.7 in August to 48.8 in September, signalling the second-largest monthly deterioration of business activity since April 2009. Only the shock immediately following the 2016 EU referendum saw a steeper monthly drop in output.
The September reading rounds off a third quarter in which output fell to the greatest extent since the second quarter of 2009 on average. Historical comparisons with GDP indicate that the PMI is indicative of the economy contracting by 0.1% in the third quarter, with the rate of decline accelerating towards the end of the quarter (the September reading is consistent with a 0.2% quarterly rate of decline). With the official measure of GDP having already shown a 0.2% decrease in the second quarter, a further fall in the third quarter would constitute a recession.
Stock building ahead of the scheduled EU exit date of 31st October was again evident in September, but to a far lesser degree than earlier in the year, adding to signs that the economy may display less of a Brexit-related bounce in the third quarter than seen in the first quarter.
UK PMI ‘all sector’ output index v GDP
