According to economists, the recent weakening of the data and leading sector indicators in the UK has increased the concerns that the country’s economy will enter a recession.
In the statement made by Nationwide, it was stated that housing prices decreased by 3.8 percent in July, recording the sharpest drop in the last 14 years. In the assessment of the international credit rating agency Standard & Poor’s regarding the decrease in the manufacturing industry Purchasing Managers Index (PMI) in the country from 46.5 in the previous month to 45.3 in July, “The decline of the manufacturing industry in the UK took a bad turn in July. The contraction in production output, employment and new orders accelerated (in the sector).
Commenting on the outlook of the British economy to BBC Radio 4, Alianz Chief Economist Mohamed El-Erian said that the public is feeling the pain of increasing housing loans, companies are also suffering from high borrowing costs, and global activity has not helped (this situation). “Yes, we really risk going into recession,” El-Erian said.
“Economy could go into recession at the end of the year or at the beginning of next year”
RSM UK economist Thomas Pugh, in his press briefing, predicted that the British economy could enter recession at the beginning of next year, and stated that the real economy was adversely affected by high policy rates.
Capital Economics Chief Economist Paul Dales also shared an information note on the subject. Dales stated that despite the slowdown in inflation, the Bank of England (BoE) expects a 50 basis point increase in policy rate.
Emphasizing that the wages of those working in the country remained below the high inflation level, Dales predicted that the core inflation could not be reduced to the 2 percent target until the end of 2024.
Stating that interest rates are likely to remain at their peak until the second half of next year, Dales said that the country’s economy is expected to enter recession at the end of this year or at the beginning of next year.
“Your lack of strategy affected the production of British factories the most”
Senior Economist Fhaheen Khan, whose evaluations were included in the statement made by the British Retailers Association (Make UK), argued that the lack of industrial strategy in the country affected the production of British factories the most.
“Today’s manufacturing PMI data shows that the economy is shifting towards anemic growth and the industry is currently at risk of facing a recession,” Khan said.
In the statement made by S&P Global/CIPS, it was stated that the manufacturing industry PMI data in the country fell to 45.3, the lowest level since May 2020.
After inflation remained sticky at 8.7 percent in May, the BoE increased its policy rate by 50 basis points from 4.50 percent to 5 percent.
Markets are predicting that the Bank of England will raise the policy rate from 5 percent to 5.25 percent at its meeting on Thursday, raising it to the highest level in the last 15 years.