22.09.2023 16:49:32

UK Private Sector Activity Logs Steepest Downturn In 32 Months

(RTTNews) - The UK private sector activity contracted at the fastest pace in more than two-and-a-half years in September amid steep declines in both manufacturing and services activity, the purchasing managers' survey results from S&P Global and the Chartered Institute of Procurement & Supply showed Friday.

The flash composite output index dropped to 46.8 from 48.6 in the previous month. Any score below 50 indicates contraction in the sector.

Further, this signaled the fastest reduction in output since the lockdown period in January 2021.

Aside from pandemic disruptions, the latest drop in private sector business activity was the steepest since March 2009.

Weaker demand in the British private sector was mainly attributed to the cost-of-living pressures and higher borrowing costs, along with cutbacks in spending among clients in the real estate and construction sectors.

Production in the manufacturing sector continued to decline more rapidly than in the service sector.

The manufacturing PMI came in at 44.2 in September versus 43.0 in the previous month.

The services business activity index also fell to a 32-month low of 47.2 in September from 49.5 in August.

Total new work received by the private sector economy decreased for the third straight month in September.

Businesses reduced their backlog of work as a result of lower demand and fewer supply chain bottlenecks, with the rate of contraction the fastest since February 2009.

After registering a five-month period of growth, private sector employment decreased in September. Excluding the pandemic lockdown months, the rate of job shedding was the fastest since October 2009.

Survey respondents expressed that budget constraints had encouraged the non-replacement of voluntary leavers and restructuring efforts.

On the price front, input costs across the private sector rose at the weakest pace since January 2021 amid falling commodity prices from suppliers of raw materials.

Nonetheless, selling prices increased at an accelerated pace in September, led by the service sector and mostly linked to higher operating costs, especially salary payments. Despite this, the overall rate of price inflation was the weakest for over two-and-a-half years.

Looking ahead, private sector firms remained optimistic about expectations for business activity over the next year, though the overall degree of confidence resumed its downward trend. The weaker sentiment is seen in both the manufacturing and service sectors.

"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," Chris Williamson, chief business economist at S&P Global Market Intelligence, said.