Friday, 4 January 2013

Are we heading for a 3rd recession?

Things are not looking good for the UK economy.

The latest Markit/CIPS UK Services PMI® says the UK service sector activity fell in the final month of 2012.

The key points are:
  • First reduction in service sector output since December 2010 
  • New business volumes post second successive monthly reduction 
  • Confidence unmoved on November’s 11-month low

Chris Williamson, Chief Economist at survey compilers Markit said: “The first fall in service sector activity for two years raises the likelihood that the UK economy is sliding back into recession. The services PMI follows an equally disappointing construction survey for December, leaving manufacturing – which accounts for just 10% of the economy – as the only bright spot. Taken together, composite data from the three surveys posted its worst quarterly performance for three-and-a-half years, and are consistent with the economy contracting by approximately 0.2% in Q4.

“Bad weather is likely to have played a role in dampening service sector activity in December, but the fact that incoming new business dropped for a second successive month suggests that underlying demand remains very weak and that activity may continue to fall in the New Year.

“The service sector is also cutting employment in the face of weak demand and an uncertain outlook suggesting unemployment may soon start to rise again as private sector lay-offs add to public sector job cuts.”

See also:  Reuters -Surprise fall in UK services activity raises recession risk

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