Construction was not included in the original flash estimate of economic conditions in the aftermath of Brexit, but the all-sector PMI fell from 51.9 in June to 47.3 in July, its lowest level since the economy was in recession in April 2009. “The downturn was felt across industry, with output scaled back across firms of all sizes and across the consumer, intermediate and investment goods sectors”.
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In addition, United Kingdom manufacturing employment decreased for the seventh straight month in July.
Data elsewhere in the Eurozone was less optimistic, however, with the Spanish manufacturing sector expanding at the slowest pace since 2013.
“July’s survey is the first construction PMI compiled entirely after the European Union referendum result and the figures confirm a clear loss of momentum since the second quarter of 2016, led by a steep and accelerated decline in commercial building”, said Tim Moore, senior economist at Markit.
It said motor insurance prices surged by 9.5% year on year in its second quarter as it looked to offset the higher cost of claims, with more expensive repairs and guaranteed vehicle hire pushing up prices.
“The drops in output, new orders and employment were all steeper than flash estimates”.
‘The weakening order book trend and upswing in cost inflation point to further near-term pain for manufacturers. The picture was more mixed for Spain, with weaker output growth and a decline in new orders contrasting with faster job creation.
Dobson added the numbers make a case for “swift policy action” in the hope of “restoring confidence”.
They are predicting “referendum shock” to trigger a technical recession, with GDP declining by 0.4% in the third quarter and 0.3% in the final three months of the year before “stabilising into a prolonged and shallow contraction”.
Nearly all economists expect the BoE to reduce rates by at least a quarter percentage point to a record low 0.25 percent on Thursday, but they are more split on whether it will restart its quantitative easing program of government bond purchases.
The update comes as United Kingdom economy showed signs of strength in the run-up to Britain’s referendum on the European Union, with official figures revealing that gross domestic product (GDP) grew by 0.6% for the second quarter, up from 0.4% in the first quarter of 2016.
“The unprecedented month-on-month drop in the all-sector index has undoubtedly increased the chances of the United Kingdom sliding into at least a mild recession”, Chris Williamson, Markit’s chief economist, said.
The depreciation of rupee also supported Indian exporters as survey data pointed to the quickest rise in new business from overseas since January.
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“There were also some reports that demand patterns had been more resilient than expected given the uncertain business outlook”.
