Output across much of the economy has fallen to its lowest level since May 2020 as inflation weighs on demand, according to an analysis by Lloyds Bank.
Twelve of the fourteen key sectors in manufacturing, services and construction saw a drop in output in October, up from nine in September and the highest number to report a contraction since the first shutdown. Skyrocketing inflation was behind the plunge, forcing businesses and consumers to cut spending to cope with rising costs, data compiled from Purchasing Managers’ Indices showed.
The technology sector was a rare bright spot, with software service providers reporting a rise in new orders. It was followed by the food and beverage industry, which had the slowest drop in demand of any manufacturing sector.
Last week, along with the fall statement, the government’s independent financial forecaster, the Office for Budgetary Responsibility, gave a grim assessment of the economy. He said Britain was already in recession and predicted growth would slow to 1.4 percent next year. In 2024, he said the economy would grow just 1.3 percent, a sharp downgrade from earlier expectations.
Jeavon Lolay, head of economics and market insight for commercial banking at Lloyds Bank, agreed that the UK economy may already be contracting. “With our domestic challenges and global headwinds unlikely to recede materially any time soon, the key question revolves around how long this recession can last,” he said. “However, it is worth noting that there are sectors and pockets of the economy that continue to perform well.”
This economic downturn is unusual in that it is accompanied by record levels of unemployment. For the three months through September, the jobless rate stood at just 3.6 percent.
However, the Lloyds Bank survey detected early signs that this could be about to change. It found that employment had risen at the slowest pace in 20 months and that the broader manufacturing sector had posted its first drop in the number of employees since December 2020.