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UK Private Sector Recovery Loses Momentum In September

ukpmi aug03 23sep20 lt

The UK private sector growth eased in September due to the persistent disruptions to business operations caused by the coronavirus pandemic, flash survey data from IHS Markit showed Wednesday.

The IHS Markit/Chartered Institute of Procurement & Supply composite output index fell to 55.7 in from 59.1 in the previous month. The score was forecast to fall moderately to 56.3.

The slowdown reflected weaker rises in both manufacturing production and service sector activity.

The services Purchasing Managers' Index came in at 55.1, down from 58.8 a month ago and below economists' forecast of 56.0.

Likewise, the manufacturing PMI declined to 54.3 in September from 55.2 in the prior month. The expected reading was 54.1.

"The indication from the survey that growth momentum is quickly lost when policy support is withdrawn underscores our concern over the path of the labour market once the furlough scheme ends next month, and raises fears that growth could fade further as we head into the winter months, especially as lockdown measures are tightened further," Chris Williamson, chief business economist at IHS Markit, said.

It now seems likely that the new restrictions will set back the economic recovery and cause GDP to stagnate in the fourth quarter, Thomas Pugh, an economist at Capital Economics, said. The big risk is that the government has to go further.

New business volumes across the private sector increased at the weakest pace for three months in September.

Employment numbers continued to decrease at a sharp pace in September as the forthcoming closure of the government's furlough scheme had accelerated decision-making on staffing levels.

On the price front, the survey revealed a renewed fall in average prices charged by private sector firms.

Companies also pointed to another drop in business expectations for the year ahead, with the degree of optimism falling to its lowest since May.

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