Data confirms the UK services sector is shrinking at its fastest since the financial crisis, according to the latest survey. As David Pollard reports, a Bank of England rate cut on Thursday looks all but certain.
If round one of this week's key PMI data showed UK manufacturing shrinking at its fastest pace in three years, then round two was if anything worse. Services activity at its lowest since March 2009. Standby, say most economists, for the very real chance of recession. (SOUNDBITE) (English) HEAD OF RESEARCH FOR UK AND EUROPE AT NATIONAL AUSTRALIA BANK, NICK PARSONS SAYING: "Our own forecasts are that we're going to get a technical recession in the second half of this year. That's two consecutive quarters of negative growth ... It's not inevitable. We have to wait and see what measures the Bank of England turns up with tomorrow. But I fear that it's very likely." Almost all economists expect the BoE to cut rates by at least 25 basis points. It would be the first move in seven years. Even the PMI data compilers call it a ''foregone conclusion." What's less certain is whether the central bank will restart its QE programme of bond purchases. Though they may be forced to at some point - especially if confidence among British consumers falls even further. (SOUNDBITE) (English) HEAD OF RESEARCH FOR UK AND EUROPE AT NATIONAL AUSTRALIA BANK, NICK PARSONS SAYING: "The British appear to be falling out of love with shopping ... The online retailers seem to be outperforming their bricks-and-mortar counterparts. That, of course, is going to continue to pressure margins, so we're going to have continued deflation in clothing, food, footwear and the traditional areas of the high street." That along with Brexit, the major conundrum for BoE governor Mark Carney. (SOUNDBITE) (English) HEAD OF RESEARCH FOR UK AND EUROPE AT NATIONAL AUSTRALIA BANK, NICK PARSONS SAYING: "There is ammunition left for the Bank of England to use. Whether it's going to be sufficient to head off a technical recession, well, time will tell." But survey after survey points to a potential downturn - time may be the one piece of the Bank's ammo that's in short supply.