Early Signs Point to Post Brexit Slowdown
The Chartered Institute of Procurement and Supply (CIPS) produce Purchasing Managers’ indices (PMIs) which are a highly accurate set of facts about current industry conditions in manufacturing, construction and services.
It signals that post-Brexit, the UK economy is contracting at its steepest pace since early 2009. The weaker performance of the UK economy during July was especially striking when looking at the month-on-month movements in the index levels. The good news is that there was an improvement in manufacturing export growth, the best for two years, as the weak pound helped drive overseas sales (though producers also suffered the flip-side of a weak currency as import prices spiked higher).
Maybe these are the first signs of a UK, post-Brexit recession, which by definition is ‘a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters’. If this is the case, then we would need to wait until late Jan 2017 to know for sure.
David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply has said “The true extent of the impact of this uncertainty still remains to be seen next month. But with optimism in the UK’s service sector at a seven-and-a-half year low, policymakers must take swift action to stop further decline amid political upheaval.”
These figures may encourage the Bank of England to reduce interest rates further tomorrow, and look at other stimuli measures to improve the economy.