Drop in business activity in England points to GDP decline in Q4

Regent Street, London

Will the UK slip back into contraction in the fourth quarter? New figures out today have raised fresh concerns about the possibility.

The latest Lloyds TSB Regional Purchasing Managers’ Index (PMI) shows that private sector business activity contracted in most English regions during October, ending a two-month period of business output expansion.

The index had stood at 51.9 in September, just above the mid-point of 50.0 which separates growth from contraction. It dropped to 49.7 in October.

London was amongst the regions in which business activity declined, with the latest reading for the capital the weakest recorded for more than three years. The East of England, North West and South East were the only English regions to register an upward trend in business activity during October.

Despite the overall decrease, higher levels of new business were seen in seven of the nine English regions, with the strongest expansion in the North West. Growth of new work was generally slower than in September, however.

Five of the nine regions reported an overall reduction in private sector employment during October, but the rate of job reductions was generally only modest, Lloyds TSB reported.

Looking at the data by sector, manufacturing output generally remained weaker than services activity across the English regions.

The UK emerged from nine months in recession in the third quarter, with the economy growing by 1%. Bank of England Governor Sir Mervyn King has said previously that the UK could expect to make a “zig-zag recovery” from the economic crisis.

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