Fears of a new recession are rising after data firm IHS Markit warned that the UK private sector weakened in June, suggesting the economy may have contracted in the last quarter.
Service providers have reported that business activity was “close to stagnation” last month. As a result, the Services Purchasing Managers' Index (PMI), which tracks activity in the sector, fell to 50.1, down from 51 in May.
The Guardian says that the “worse news” is that manufacturing and construction both contracted last month, and that when you add in the services data, “it appears that the UK private sector shrank in June for the first time since 2016”.
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It adds: “This suggests that the uncertainty created by Brexit means the UK economy shrank by 0.1% in the last quarter - putting it half-way into a full-blown recession.”
Sky News says the latest data “suggests uncertainty is gripping the economy with little sign of a pick-up ahead”, while Reuters adds that “worries about Brexit were compounded by global trade tensions” during the three months.
Chris Williamson, chief business economist at IHS Markit, said the economy had suffered “the second-steepest fall in output since the global financial crisis in April 2009”.
The analyst does not paint a pretty picture moving forward, either. He says “Brexit-related uncertainty has increasingly exacerbated the impact of a broader global economic slowdown” and warns that “sentiment about the year ahead is worryingly subdued, suggesting the third quarter could see businesses continue to struggle”.
As Boris Johnson and Jeremy Hunt battle to become prime minister, Ranko Berich, head of market analysis at Monex Europe, warns that the winner will be walking into a huge economic challenge.
“Whoever ends up in No. 10 will inherit an economy on the brink of contraction - and will have very limited margin for error in the next phase of the Brexit mess,” says Berich.
Nick Kilbey, sales trader at Foenix Partners, says simply that the new data paints a “woeful” picture for the British economy.
