Recession warnings are flashing, with a survey of purchasing managers pointing toward a contraction and potential jump in unemployment. The result prompted a quick shift in the policy debate away from fighting inflation and toward the risks buffeting the economy.
“The economy is entering more troubled waters, and a recession is likely to ensue this winter,” said Sandra Horsfield, economist at Investec.Inflation is falling more sharply than the BOE had anticipated, data released on Wednesday showed. The Consumer Prices Index eased to 6.7% in August, well below the 7% or more the BOE and economists had anticipated.
That suggests the BOE’s bitter medicine of 14 back-to-back rate rises is beginning to work, as price pressures and the jobs market come off the boil, giving policy makers time to wait to see if inflation eases as quickly as they expect.Retail sales data on Friday showed a 0.4% gain in August, making up for part of the ground lost in July, when wet weather kept shoppers out of stores.
The value of retail sales in August was 17% above pre-pandemic levels in February 2020, while the volume of those sales 1.5% below — leaving people paying more to buy fewer goods.