UK recession fears heighten as the economy shrinks and the Brexit divide deepens, U.S economy shrank in November
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Summary:
- UK economic activity shrank for a fourth straight month.
- Pragmatists vs Zealots driving the Brexit divide.
- In November, the U.S. economy shrank for the fifth consecutive month.
UK recession fears heighten
With new orders declining at the highest rate in nearly two years, UK economic activity shrank for a fourth straight month, signaling a recession that is expected to endure longer than a year. The S&P Global/Cips UK flash composite purchasing managers' index, which monitors changes in manufacturing and services activity on a monthly basis, remained essentially steady in November at 48.3 compared to 48.2 in October.
The reading for November was the fourth consecutive reading below the 50-point threshold, which denotes a majority of businesses reporting a contraction, despite being higher than the 47.5 forecast in a Reuters poll.
Additionally, price pressures decreased in November, in part due to a decline in demand. This, according to Williamson, suggests that the Bank of England may begin to raise interest rates gradually over the next few months. Markets anticipate that the Monetary Policy Committee of the BoE will raise interest rates by 50 basis points rather than the 75 basis points that were announced on November 3 at its meeting.
According to the study, Rishi Sunak's election as prime minister increased corporate confidence, but managers' attitudes were among the most depressing observed over the previous 25 years.
UK economic activity shrinks as recession fears mount https://t.co/fH7vq1akKf
— Financial Times (@FT) November 23, 2022
UK government’s Brexit divide
A top government official wonders in private about how to make Brexit work better for business and considers a "Swiss-style" arrangement. Tory hardliners start to denounce the move, and the prime minister immediately retracts his statement. Rishi Sunak had no other options. Even though he is a staunch supporter of Brexit and can say without irony, "exploit the economic opportunities of Brexit," his paranoid and discordant MPs continue to cast doubt on his commitment to the cause.
The idea was more of a hazy medium-term desire to lower trade obstacles rather than a covert scheme. The Swiss model of selective access to the single market has a number of issues, not the least of which is that the EU despises it. Another is that the UK would still like to eliminate automatic adherence to EU regulations, oversight by the European Court of Justice, and free movement of persons. The third is that the EU is not overly concerned with altering the agreement.
Failure to address the worst effects of Brexit helps those who want to undo the entire project, and this has become more urgent since the Truss government encouraged voters to link Brexit with the nation's economic woes.
The true Brexit divide is now between pragmatists and hardliners https://t.co/dyVH23vGoB
— Financial Times (@FT) November 23, 2022
US economy shrank for the fifth-consecutive month in November
In November, the U.S. economy shrank for the fifth consecutive month, with a measure of new orders falling to its lowest level in two and a half years as higher interest rates hampered demand. The manufacturing and services sectors are monitored by S&P Global's flash U.S. Composite PMI Output Index, which dropped to 46.3 this month from a final reading of 48.2 in October, the company reported on Wednesday. A reading below 50 indicates that the private sector is contracting. The Federal Reserve's most aggressive interest rate hike cycle since the 1980s, which aims to reduce inflation by stifling economic demand, has caused activity to decline.
Due in part to declining demand, businesses were also boosting prices for their goods at the slowest rate in little over two years, with some companies reporting concessions and reductions to persuade clients to place orders. The decrease in price measurements is consistent with statistics released this month that shows a marked slowdown in producer and consumer inflation in October.
U.S. business activity weakens further in November - S&P Global survey https://t.co/aq0TapeO2X
— Yahoo Finance (@YahooFinance) November 23, 2022
S&P Global said its flash U.S. Composite PMI Output Index fell to 46.3 this month from a final reading of 48.2 in October.
Sources: ft.com, twitter.com, finance.yahoo.com
