U.K. PMIs Indicate Recession Risks, Increasing Pressure on BoE

Investing.com – Following the release of the U.K.’s construction purchasing managers’ index (PMI) for July on Tuesday, Markit chief economist Chris Williamson cautioned that Britain is at risk of slipping into a recession, increasing pressure on the Bank of England to implement new stimulus measures.

The data shared on Tuesday revealed significant downturns in various sectors. Williamson stated, “If we combine the construction PMI with other indexes, the overall PMI for all sectors will have dropped to 47.3, down from 51.9.”

He emphasized that the results could indicate the steepest decline in business activity since April 2009, and the possible downturn of 4.6 points would represent the largest deterioration ever recorded since the surveys began in 1997.

Williamson also pointed out that the final services PMI will be published on Wednesday. However, he cautioned against overinterpreting these results due to the heightened political and economic uncertainty resulting from the U.K.’s decision to exit the European Union.

Despite these uncertainties, he warned, “The data suggest the potential for the economy to slip into decline during the third quarter and possibly enter recession.”

Williamson expects the Bank of England to lower interest rates to a record low of 0.25% on Thursday, in addition to discussing the implementation of further unconventional measures to stimulate economic activity.

“Pressure has been building for policymakers to creatively explore new avenues to stimulate demand,” Williamson concluded.