The global S&P/Cips index, a composite index of UK PMs, a measure of private sector activity, fell to 50.9 in August from 52.1 the previous month. This is the lowest reading since February 2021, when the country was in lockdown due to a pandemic. The reading, based on data collected between Aug. 12 and 19, was weaker than the 51.1 forecast by economists polled by Reuters and was marginally above the 50 mark, indicating that a majority of businesses reported month-on-month growth. Annabel Fiddes, deputy chief economist at S&P Global Market Intelligence, said: “The UK private sector came close to stagnating in August, as soft growth in services sector activity just offset a deeper downturn in manufacturers.” The manufacturing PMI fell from 51.1 in July to 46 in August, the first reading to show a contraction since May 2020, when the UK economy was in strict lockdown. Reduced customer demand, delayed delivery of goods and materials and labor shortages weighed on performance, according to committee members. Some companies reported that increased economic uncertainty and high costs had affected market confidence and sales. The PMI for factory orders fell sharply, indicating a third straight month of contraction. Consumer demand is constrained by historically high inflation in the UK, which rose to 10.1% in July. Citigroup, the bank, on Monday forecast inflation will top 18 percent in January next year as energy prices continue to soar. Paul Dales, chief UK economist at Capital Economics, a consultancy, said “we suspect the composite PMI will sound the alarm bells for recession soon”, adding that he expected a recession in the third quarter after official data showed that the economy contracted in the second quarter. The Bank of England this month predicted a protracted recession that would leave the economy smaller by the third quarter of 2025 than it was before the pandemic. But Dales said that, in the face of soaring inflation, the BoE would have no choice but to keep raising interest rates from 1.75% now to 3%. Simon Harvey, head of foreign exchange analysis at Monex Europe, a foreign exchange firm, said that with the PMI inflation indicator still showing prices rising, albeit at a slower pace than in previous months, Tuesday’s data “ confirm our view that the BoE is likely to make a second 50 basis point hike at its September meeting.” This view is supported by recent further increases in European wholesale gas prices, which suggest that cost pressure could intensify in the coming months. The recession in the manufacturing sector was confirmed by the first fall in output since February 2021 in the three months to this August, the CBI, an employers’ body, said on Tuesday.

However, the UK composite PMI was stronger than in the eurozone, where the index fell to 49.2, thanks to the resilience of the UK services sector. The UK services PMI was largely unchanged at 52.5, with Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, saying this could reflect “the additional income support provided by the government in July”. But overall, the survey showed that the UK’s economic recovery since the pandemic hit has stalled. John Glenn, chief economist at Cips, said supply chain disruptions from the war in Ukraine, soaring inflation, higher interest rates and now industrial action at ports “are keeping private sector business owners awake at night”. Are we heading for a global recession? Our finance editor Chris Giles and US finance editor Colby Smith discussed this and how different countries are likely to react in our latest IG Live. Check it out here.