GRIM economic figures have suggested the UK economy is teetering on the brink of a sharp recession as higher interest rates dent business activity.
A closely watched survey of manufacturers and the service industry showed a bigger than expected slump in activity — sparking fears that the economy is already weakening.
The S&P Purchasing Managers Index (PMI) indicated that both services and manufacturing output fell far short of expectations.
To the alarm of economists, this is despite bumper spending on restaurants and holidays during the summer.
Yesterday’s PMI index fell to a 33-month low of 47, from 50.8 in August.
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Anything below 50 is considered a shrinking of the economy.
Excluding the hit from lockdowns, this is the steepest fall in output since the global financial crisis in 2008.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the dip “indicates that the fight against inflation is carrying a heavy cost in terms of heightened recession risks”.
The PMI survey showed that new orders by private companies had fallen to a nine-month low.
The fall was blamed on “sluggish” domestic economic conditions and higher interest rates that sparked caution among clients.
The shock weakening in economic output has prompted money markets to dramatically rethink their expectations on interest rate rises.
A week ago, it was expected the Bank of England would have to continue raising interest rates to 6 per cent in its efforts to tame inflation.
However, these recession warnings have shocked economists, and traders are now betting interest rates will peak at 5.5 per cent.
Analysts at Pantheon Economics said that the weak PMI data “should convince the Bank to stop” raising rates.
This will cause huge relief for homeowners who will face lower remortgaging costs later this year.
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Simon French, chief economist at Panmure Gordon, said: “The loss of momentum in the latest activity data really matters for UK borrowers.
“Financial markets immediately reduced the chances of further interest increases.
“This will be reflected in the borrowing rates offered by high street banks.”
Peppa now, buy later
PARENTS taking their kids to Peppa Pig World on “Buy Now Pay Later” finance have helped boost Klarna’s sales in the UK by more than a quarter.
The Swedish online payments company said that it had grown to 18million customers in the UK and over 31,000 merchants — ranging from retailers to leisure companies — in the past year.
Klarna reported that overall sales in Europe had grown by over 14 per cent in the past year, with its “buy now, pay later” policy accounting for a third of all transactions.
It comes after it posted a loss of £1billion last year.
This summer Klarna announced a partnership with Peppa Pig World’s owner, Paultons theme park.
The partnership allows visitors to pay for tickets over 30 days or split their purchases into three-month, interest-free instalments — helping to lower the upfront cost of a day at the attraction in Romsey, near Southampton.
More shoppers are turning to flexible finance options as the cost-of-living crisis squeezes their budgets.
Postal payback
POST OFFICE boss Nick Read has said he will return all of his payment linked to the Horizon postmaster scandal inquiry, after political pressure.
About 700 Post Office workers were convicted and some jailed for theft and false accounting, later revealed to be an error in the company’s Fujitsu Horizon software.
It was one of the UK’s biggest ever miscarriages of justice.
Mr Read will now repay the £40,800 he received for cooperating with the inquiry, on top of £13,600 he already agreed to return.
THE finance chief of Durex and Cillit Bang-maker Reckitt Benckiser, Jeff Carr, is leaving.
It is the 35th CFO change at a FTSE 100 firm this year.
Many want a switch after working through the pandemic, say analysts.
Nike’s Shannon Eisenhardt will replace him.
Food cut wars
THE back-to-school rush has prompted supermarkets to sharpen their prices.
Sainsbury’s launched an Aldi Price Match yesterday on more than 400 items, and rolled out lower Nectar prices on frozen foods — including family favourites such as Birdseye fish fingers and Goodfella's Pizzas.
Online grocer Ocado said it had the cheapest butter on the market at £1.85 for 250g.
Tesco has boosted its market share by competing with the discounters and offering lower Clubcard prices.
Stanley’s £5.4m rap on deals
THE energy regulator has fined Morgan Stanley £5.4million after its bankers conducted trades on wholesale oil and electricity prices over private WhatsApp messages.
It is the first fine Ofgem has issued under transparency rules aimed at protecting consumers from energy market manipulation and insider trading.
Ofgem said Morgan Stanley’s failure was “unacceptable”.
The Wall Street bank received a 30 per cent discount on a potential £7.7million fine for settling early.
The End Fuel Poverty Coalition said: “Every act of trading energy on the markets usually results in profit for the traders and adds to our bills.
“Units of energy can be traded several times before reaching our energy suppliers.”
Ofgem figures show that every unit of gas is traded 13 times on average by banks.
Bill fury at Virgin
BROADBAND provider Virgin Media has been accused of trapping consumers into higher bill price rises.
Consumer campaign group Which? has called on telecom regulator Ofcom to investigate “egregious” bill price-hiking — with no chance to cancel without facing huge exit fees.
Broadband bills rose by 14 per cent this year on average.
A Virgin Media spokesman said: “We refute these baseless allegations.”