(Alliance News) - The severity of the UK private sector downturn deepened in September, according to preliminary survey data on Friday.
The S&P Global/CIPS flash UK flash composite purchasing managers' index fell to a 32-month low of 46.8 points in September from the final reading of 48.6 in August. This was worse than FXStreet-cited market consensus of 48.7 points.
Manufacturing continued to decline at a faster pace than services, with the factory sector's flash PMI edging up to 44.6 from 44.1. However, the gap between the two sectors narrowed, as the flash services PMI worsened to 47.2 from 49.5.
Survey respondents pointed to weaker demand amid a cost-of-living crisis and high interest rates, as well as cutbacks in client spending in real estate and construction.
Total new work across the private sector fell for the third month in a row. The decline was deepest among service providers, where new work fell at the fastest rate since last November. In manufacturing, the rate of decline softened slightly.
Employment in the private sector began to fall, after five months of growth. The rate of job shedding was the fastest since October 2009, if the pandemic lockdown months are excluded.
The data also showed that business expenses rose at the slowest pace since the start of 2021. However, average prices companies in the private sector charged "increased at a robust pace". This was led by the service sector, where respondents pointed to higher operating costs, wages in particular.
"The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK. The steep fall in output signalled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement," said Chris Williamson, chief business economist, S&P Global Market Intelligence.
He continued: "A major concern in the inflation outlook has been wage growth, but with the survey now signalling the sharpest fall in employment since 2009, wage bargaining power is being eroded rapidly.
"With the Bank of England having had sight of the survey data prior to its latest policy decision, the worrying signals from the survey of heightened recession risk and cooling inflationary pressures are likely to have added to calls to halt rate hikes."
At its September meeting on Thursday, the Bank of England maintained bank rate at 5.25%, a more than 15-year high, in what was something of a surprise move.
The flash PMIs are compiled by S&P Global from responses to surveys sent out to around 650 manufacturers and 650 service providers in the UK. Responses are collected in the second half of the month.
By Elizabeth Winter, Alliance News senior markets reporter
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