The latest survey of purchasing managers across British companies shows that uncertainty ahead of the upcoming budget is impacting the UK economy. Data from S&P Global reveals that private sector activity growth has slowed this month, with some firms reporting that clients are delaying decisions pending the Autumn Budget. Fiscal policy uncertainty was cited as the top concern among UK private sector firms, leading to a slowdown in investment and employment growth.
On a positive note, firms have slowed their price rises this month, and the overall economic growth, while lower than in previous months, remains in positive territory. Chancellor Rachel Reeves has assured that there will not be a return to austerity and that there will be real terms increases to government spending.
In contrast, the eurozone economy is shrinking for the first time in seven months, with Germany’s manufacturing sector facing a rapid downturn. Businesses reported decreased orders, leading to job cuts and a fall in new business inflows. This has led to concerns of a technical recession in Germany, with GDP expected to shrink in the July-September quarter.
Despite the challenges faced by the UK and eurozone economies, the pound has hit a two-year high against the euro, reflecting the UK’s relative economic resilience compared to its European counterparts. The UK economy is showing signs of a ‘soft landing’, with growth remaining steady and inflationary pressures easing, providing room for potential interest rate cuts in the near future.
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