And So It Begins

 

 

Britain's decision to leave the EU has led to a dramatic deterioration in economic activity not seen since the aftermath of the financial crisis according to the data from IHS Markit's Purchasing Managers Index.

 

The index has fallen to 47.7 in July, the lowest level since April 2009 (a reading below 50 indicates economic contraction) and is the first major evidence that the UK is entering a sharp downturn.

 

The only other times we have seen this index fall to these low levels was the global financial crisis in 2008 / 2009, the bursting of the ‘dot com’ bubble and the 1998 Asian financial crisis.

 

The figures from the index are taken seriously by economists as early warning signs of what is to come. When there is a downturn, the index generally tells the same story. So this is a troubling set of results. But it is just one month’s worth of data. It is possible that this is shock-induced and that the economy will right itself in the coming months.

 

That said, the survey results do increase the chances of some action from the Bank of England……perhaps an interest rate cut in August or some additional spending plans in the chancellor's Autumn Statement.

 

One thing is for sure, no action just isn’t a consideration.

 

Interesting times