The UK’s economy may have tipped into recession following a downturn in the dominant service sector, according to closely-watched figures.
The IHS Markit/CPS purchasing managers’ index for services fell to a six-month low of 49.5 in September. The 50 level divides growth from expansion.
It suggests the economy shrank 0.1% in the three months to September, after a 0.2% fall in the previous quarter.
Some experts urged caution, as official data last month eased recession fears.
Combined with even weaker manufacturing and construction purchasing managers’ indexes (PMI) earlier this week, September’s all-sector PMI sank to 48.8 from 49.7. This was its lowest since the month after the referendum decision to leave the EU in June 2016, and before that 2009.
“Coming on the heels of a decline in the second quarter, [this] would mean the UK is facing a heightened risk of recession,” said IHS Markit economist Chris Williamson. A recession is normally defined as when an economy contracts over two consecutive quarters.
“September’s decline is all the more ominous, being the result of an insidious weakening of demand over the past year rather than a sudden shock,” Mr Williamson added. He highlighted Brexit uncertainty, worries about trade tensions between the US, China and Europe, and weaker growth in the eurozone.
Separate PMI figures on Thursday showed Germany’s services sector sharply lost momentum in September, fuelling fears that contraction in the country’s manufacturing sector was spilling over into the rest of Europe’s largest economy. Germany’s services PMI fell to 51.4 from 54.8 in August, the lowest reading for three years.
Although the PMI data is closely followed it is not considered foolproof. Immediately after the Brexit referendum, the data indicated a sharper downturn than was actually the case.
Last month, latest figures from the Office for National Statistics (ONS) pointed to the UK economy growing faster than expected in July, easing fears that it could fall into recession.
Growth was flat over the three months to July, but this was an improvement on the 0.2% contraction seen in the April-to-June quarter. ONS growth data for August is due for publication on 10 October.
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