UK Facing Recession Threat After Brexit Vote

The Purchasing Managers Index (PM) for the manufacturing sector was at 49.1, and for services was at 47.4 in July.

The index ranked at 52.4 in June.

Britain economy has actually declined after Britons voted for leaving the European Union last month, economic data issued by the Markit showed on Friday. All ports of entry into the country face higher security measures as the government aims to keep arms from entering.

The report further indicated that new business volumes expanded at the fastest pace since October 2015, while showing the strongest increase in manufacturing payroll numbers for 12 months.

The sector also saw a record slump in expectations.

The sharp contraction was triggered by falling output and orders, while business optimism in Britain’s powerhouse services sector hit a seven-and-a-half-year low.

Williamson said the economic effects of Brexit may level out over the course of several months.

Although weak overall, the Australian Dollar was able to make gains against the Pound thanks to poor United Kingdom data chronicling the Brexit aftermath.

The data provides a stark picture of the state of the economy following the Brexit vote, with some economists predicting that the United Kingdom faces faces the prospect of slipping into recession later this year.

The euro was little changed against the dollar, surrendering most of its gains from European Central Bank President Mario Draghi’s comments that the bank would take time to reassess any changes in the economic outlook. The survey is one of the first indicators of the country’s economic health following the vote.

Chris Williamson, chief economist at IHS Markit, said the downturn has been “most commonly attributed in one way or another to “Brexit”. “With policymakers waiting to see hard data on the state of the economy before considering more stimulus, the slump in the PMI will provide a powerful argument for swift action”.

They come as new Chancellor Philip Hammond indicated the United Kingdom could “reset fiscal policy” as data emerges about how the economy has reacted to the vote – indicating a less aggressive approach to cuts aimed at shrinking the deficit than that taken by former chancellor George Osborne.

The report said the downturn in the services sector was “more marked” than in manufacturing, with services activity and new orders dropping at their quickest rate for seven years. Should the consumer price index show weakening or sluggish inflationary pressures, this will all-but confirm to the markets that that RBA intends to cut interest rates at its next policy meeting.

He added: “The Bank will throw the kitchen sink at this now”.

“What it tells us is businesses confidence has been dented, they’re not sure, they’re in a period of uncertainty now”.

But the Chancellor Philip Hammond has said that they will respond “in any way necessary” to help the economy recover as fast as possible.