Growth slowed across British business services and consumer spending eased last month, a Bank of England survey showed, offering a more mixed picture of the economy than some of the gloomier indicators since June’s Brexit vote.
The BoE released some of the findings of its August regional agents’ survey in last week’s quarterly Inflation Report, which showed companies expected the referendum would hurt capital spending, hiring and turnover over the coming year.
Although Wednesday’s report suggested the economy is likely to slow, the monthly survey of around 700 companies was not as starkly downbeat as the larger purchasing managers’ indexes (PMIs).
“This survey therefore adds some weight to the view that the immediate sharp drop in the (PMI) indices may have been a slight over-reaction,” said James Knightley, senior economist at ING.
Last week’s Markit/CIPS PMIs suggested the economy is now contracting at the fastest rate since the 2008-09 financial crisis.
Deputy Governor Ben Broadbent cited this in a Reuters interview last week as one reason why the BoE cut interest rates to a new record low and launched stimulus measures that could add up to 170 billion pounds to the financial system.
Revenue growth in business services firms eased to a three-year low, according to the BoE survey. But for consumer services companies the slowdown was much smaller.
The BoE’s gauge of retail sales values fell to its lowest level since August 2012, but the central bank linked some of this to unusually wet weather.
On Wednesday, major retailers including supermarket Tesco and department store and food retailer John Lewis said they had not yet been affected by the referendum result, and the British Retail Consortium reported strong spending growth.
In common with other business surveys, however, the BoE said investment and employment intentions wilted last month.
“With British businesses suggesting that they are pulling back on expansion plans the survey is consistent with the general consensus expectation amongst economists that the UK will experience a mild recession over the next 6-12 months,” ING’s Knightley concluded.
Last week the BoE forecast that growth rates would slow to just above zero for the rest of the year but – partly reflecting the expected effect of its own stimulus measures – stopped short of predicting recession.
Source: Reuters (Reporting by Andy Bruce, editing by David Milliken and Hugh Lawson)