Bank of England lowers growth expectations for the economy

The Bank of England lowered its growth expectations for the economy on the same day that data showed that the UK economic recovery lost momentum in September.

The recovery has lost momentum in recent weeks amid rising Covid cases, staff shortages and rising costs.

IHS Markit’s closely watched Composite Purchasing Managers’ Index (PMI), which measures activity in both manufacturing and services, returned a value of 54.1 – meaning that output growth is at its lowest level in seven months slowed down.

The gas is running out: The Composite Purchasing Managers’ Index returned a value of 54.1 – which means that production growth slowed to the lowest level in seven months

Any number over 50 indicates growth. That was a drop from 55 in August and the lowest since lockdown restrictions began to be relaxed. The dismal data came as the Bank of England cut its growth expectations by around 1 percent in the third quarter of the year, meaning the economy will be around 2.5 percent smaller by the end of September than it was before the pandemic.

Chris Williamson, Chief Economist at IHS Markit, said: “The September data will heighten concerns that the UK economy is heading towards ‘stagflation’, with downward growth as prices keep rising.

‘While there are clear signs of a slowdown in demand since peaking in the second quarter, the survey also suggests that business activity is increasingly being constrained by material and labor shortages, particularly in manufacturing but also in some service companies.

“A shortage of personnel and components was cited as the cause of production declines in the food, beverage and vehicle manufacturing industries.”

Despite worries about rising inflation, the Bank of England yesterday voted to keep interest rates at their record low of 0.1 percent and continue their money printing program of £ 895 billion.

But as a sign that rate hikes might be on the horizon, two of the bank’s nine-member monetary policy commission voted to end what is known as quantitative easing, fearing it could contribute to inflation. Small businesses in particular were a burden on supply chains.

The Federation of Small Businesses (FSB) released a report today calling on the Department for International Trade (DIT) to provide direct support to smaller businesses. She wants the government to make international trade advisers available to small businesses, promote the benefits of international trade deals, and ensure they are available to those businesses.

FSB Chairman Mike Cherry said, “Small exporters have had a difficult time due to the pandemic, supply chain issues and adapting to the complications associated with the end of the transition period.

“This has left many facing rising costs, unsure about the future of their small businesses, and debating the best way to grow and maintain their businesses.

“Our report highlighted some key areas where we hope DIT can act to help small businesses either looking to start their export path or current exporters to thrive.”

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