Bri­tain heads for new re­ces­sion

The Pak Banker - - COMPANIES/BOSS -

The risk that Bri­tain is en­ter­ing its third re­ces­sion in four years grew on Fri­day with fig­ures show­ing that man­u­fac­tur­ing shrank un­ex­pect­edly last month and mort­gage ap­provals for home buy­ers dropped in Jan­uary. Gross domestic prod­uct fell at the end of last year, bring­ing Bri­tain within sight of an­other re­ces­sion and the lat­est data sug­gested the cen­tral bank may need to do yet more to re­vive the econ­omy.

The pound sank to its low­est level against the dol­lar in more than 2-1/2 years, while prices of Bri­tish government bonds - which the Bank of Eng­land could re­sume buy­ing - rose af­ter the re­leases.

The Markit/CIPS Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex (PMI) fell to 47.9 from a down­wardly re­vised 50.5 in Jan­uary, con­found­ing fore­casts for a rise to 51.0. It was the first read­ing be­low the 50 line that sep­a­rates growth from con­trac­tion since Novem­ber.

“It’s a bit of a dou­ble whammy of dis­ap­point- ing news,” said Alan Clarke, econ­o­mist at Sco­tia­bank. “Not a good start (to the year) and really shouldn’t change any­one’s view that there’s pre­cious lit­tle growth mo­men­tum in the UK and par­tic­u­larly not in man­u­fac­tur­ing.” The num­bers are the lat­est in a string of bad news for the Con­ser­va­tive-led coali­tion government and its fi­nance min­is­ter Ge­orge Os­borne. Moody’s down­graded Bri­tain’s triple-A rat­ing last week, prompted by weak eco­nomic growth prospects.

In the last quar­ter of 2012, a plunge in fac­tory out­put - which ac­counts for around a 10th of the econ­omy - shaved 0.1 per­cent­age point off eco­nomic growth, ac­cord­ing to of­fi­cial data re­leased ear­lier this week. Markit said fac­tory out­put fell last month at the fastest pace since Oc­to­ber.

The re­turn to con­trac­tion of the man­u­fac­tur­ing sec­tor is a big sur­prise and rep­re­sents a ma­jor set­back to hopes that the UK econ­omy can ... avoid a triple-dip re­ces­sion,” said Chris Wil­liamson, the Markit econ­o­mist who com­piled the sur­vey.

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