The UK economy is starting to “work empty” as order books dry up | Economic growth (GDP)

The British economy is starting to work “empty” as order books dry up after the pandemic and the highest inflation in 40 years affects confidence, according to the latest photo of the private sector.

Rapid estimates of the economy’s performance in June showed the lowest business optimism since the first months of the Covid-19 pandemic in the spring of 2020 and the sharpest decline in new orders in a year.

The monthly survey of purchasing managers, prepared by S&P and the Chartered Institute of Procurement and Supply (CIPS), shows that overall business activity in the services and manufacturing sectors remained unchanged from a 15-month low of 53.1 in May.

An indicator above 50 suggests that private sector activity is expanding, while an indicator below 50 indicates a contraction.

Demand for labor remains strong despite weaker new business growth, with job creation peaking in three months.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The economy is starting to look empty. The current growth of the business is supported by orders placed in previous months, as companies report almost a cessation of demand.

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“In particular, producers are struggling with falling orders, especially for exports, and the services sector is already seeing signs of recent growth in growth from the lingering demand for a pandemic, which is reversing amid rising living costs.

A similar PMI for the euro area showed a sharper slowdown than in the UK, with the composite measure for services and manufacturing falling from 54.8 to 51.9 in June. Williamson said, with the exception of the months affected by the pandemic blockade, it was the sharpest decline since the 2008 global financial crisis.

Williamson said business confidence in the UK has now “fallen” to a level that in the past has usually signaled an impending recession. “The weakness of the broad flow of economic data so far in the second quarter shows a decline in GDP, which forecast PMI figures suggest will gain momentum in the third quarter,” he added.