UK Economy is Cautioned of Stagflation Risk as Cost Surges

The UK economy faltered in September, as cost pressures increased and demand eased.

Source: IHS Markit

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The flash reading of Sept IHS Markit manufacturing purchasing managers index was 56.3, down on August’s final reading of 60.3, and a 7-month low. The figure also missed consensus expectations of 59.0. The output index was lower at 51.8 compared to 54.1 a month earlier.

IHS Markit attributed the economic slowdown to “severe” supply chain disruption and signs that demand was softening.

Alongside a reading of 54.6 for services business activity index against 55.0 in August, the flash UK Composite output index dropped to a seven-month low of 54.1, against August’s reading of 54.8.

Meanwhile, the rate of input cost inflation accelerated, attributable to a number of factors, including rising wages, the impact of supply chain disruptions on raw materials, and higher transportation costs.

Chris Williamson, chief business economist at IHS Markit stated that the September PMI data will add to concerns that the UK economy is heading towards stagflation, with growing trending lower as prices soar to record highs.