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UK's post-lockdown recovery loses momentum in September

By Michele Maatouk

Date: Wednesday 23 Sep 2020

UK's post-lockdown recovery loses momentum in September

(Sharecast News) - The UK's post-lockdown recovery lost momentum in September, according to figures released on Wednesday.
The IHS/Markit CIPS flash composite purchasing managers' index - which measures activity in the services and manufacturing sectors - fell to 55.7 this month from August's six-year high of 59.1, coming in below consensus expectations of 56.1.

The services PMI declined to 55.1 from 58.8, missing expectations of 55.9. The manufacturing PMI printed at 54.3 for September, down from 55.2 but a touch ahead of expectations for a reading of 54.0.

A reading above 50.0 indicates expansion, while a reading below signals contraction.

The survey also showed that jobs continued to be cut at a fierce rate in September as companies look to reduce costs amid weak demand.

Chris Williamson, chief business economist at IHS Markit, said: "The UK economy lost some of its bounce in September, as the initial rebound from Covid-19 lockdowns showed signs of fading. It was not surprising to see that the slowdown was especially acute in services, where the restaurant sector in particular saw demand fall sharply as the Eat Out to Help Out scheme was withdrawn.

"Demand for other consumer-facing services also stalled as companies struggled amid new measures introduced to fight rising infection rates and consumers often remained reluctant to spend.

"Encouragingly, robust growth in manufacturing, business services and financial services has offset weakness in consumer-facing sectors, meaning the overall rate of expansion remained comfortably above the survey's long-run average, which adds to expectations that the third quarter will see a solid rebound in GDP from the collapse seen in the second quarter."

Thomas Pugh, UK economist at Capital Economics, said the drop in the composite flash PMI suggests the recovery has already started to flatten out.

"And reinstating restrictions on business opening hours and encouraging people to work from home again could cause the recovery to stall completely in Q4," he said.

"Indeed, it now seems likely that the UK restrictions will set back the economic recovery and cause GDP to stagnate in Q4. But the big risk is that the government has to go further. For example, a two-week national lockdown could reduce the level of GDP by 5% and set back the economic recovery by a year."

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