New data shows impact of Brexit vote on UK economy

The UK economy is contracting at the fastest rate since the financial crisis, according to new figures released on Friday morning.

The Markit/CIPS purchasing managers? index (PMI) stood at 47.7 for July 2016, its lowest reading since April 2009 and down from 52.4 in June 2016.

Manufacturing output and new orders both fell for the first time since early 2013. But new export business rose, mainly due to the sharp fall in the pound.

The downturn in services was more marked than that seen in manufacturing, with services activity and new orders both falling at the fastest rate in over seven years. Service providers? optimism about the coming 12 months slumped to a seven-and-a-half year low.

Chris Williamson, chief economist at survey compiler Markit, said that the downturn in the economy is primarily due to the result of last month?s referendum in which the UK voted to leave the European Union.

?The one ray of light was an improvement in manufacturing export growth to the best for two years as the weak pound helped drive overseas sales, though producers also suffered the flip-side of a weak currency as import prices spiked higher,? Williamson explained.

He continued: ?At this level, the survey is signalling a 0.4% contraction of the economy in the third quarter, though much of course depends on whether we see a further deterioration in August or if July represents a shock-induced nadir. Given the record slump in service sector business expectations, the suggestion is that there is further pain to come in the short-term at least.

?With policymakers waiting to see hard data on the state of the economy before considering more stimulus, the slump in the PMI will provide a powerful argument for swift action.?

Markets analyst Neil Wilson from ETX Capital, quoted by the BBC, said the PMI data suggests the UK is heading for another recession ?and it is almost certain the BoE (Bank of England) will pull the trigger on aggressive stimulus to boost aggregate demand?.

Peter Dixon, an economist at Germany?s Commerzbank, agreed that the data points to a tough time for the economy.

?I think we?ll get a recession, but it?ll be a shallow one. But yes, we are in for a prolonged period of sluggish growth,? he told Bloomberg.