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MoneyWhy the UK might already be in recession

04:45  03 september  2019
04:45  03 september  2019 Source:   news.sky.com

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Image: Hopes of a bounce-back for the manufacturing sector have failed to materialise.

The UK could already by in a technical recession because of Brexit, without even leaving the EU according to one British research body. The National Institute for Economic and Social Research, in a report said that the UK economy has already stagnated due to uncertainty surrounding the decision

Why the UK might already be in recession © Sky News Screen Grab Hopes of a bounce-back for the manufacturing sector have failed to materialise

The UK might be in recession.

If that sounds a little scary, then be assured that this is by no means assured.

There is still one more month left in the current quarter, and there is still a chance the early signals we're getting are not a fair reflection of the state of the economy.

Nonetheless, those early signals are not promising.

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You'll recall that in the second quarter of the year the economy contracted by 0.2%.

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Why is Britain’s GDP down more than other major countries? One of the two main definitions of recession in the UK is at least two quarters of shrinking gross domestic product Some economists believe this definition of recession is flawed, since an economy would not be in recession if it

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You may recall that this was down in part to the biggest contraction in manufacturing sector activity since the financial crisis.

The expectation among economists was that the sector would quickly bounce back.

Those factories shut down temporarily over that initial Brexit deadline (remember that?) would restart again and output would bounce back in the third quarter.

But on the basis of the early data, quite the opposite is happening.

Why the UK might already be in recession © 2019 Getty Images NEWARK, ENGLAND - AUGUST 09: Chancellor of the Exchequer, Sajid Javid during a visit to the National Grid Training Centre near Newark on August 09, 2019 in Newark, Engand. The UK's economy shrank for the first time since 2012 in the second quarter of this year, as the manufacturing and construction sectors both slumped. The chancellor has said that he does not expect the UK to slide into recession. (Photo by Joe Giddens - WPA Pool / Getty Images

Today's purchasing manager's index figures for the manufacturing sector showed it is contracting, with new orders, exports, employment and confidence all dropping.

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Fair use is a use permitted by copyright statute that might otherwise be infringing. Non-profit, educational or personal use tips the balance in favour of fair Why The Coronavirus Recession Is Unlike Any Other.

Forget ' recession ': this is a depression | David Blanchflower and David Bell. Writing in the Guardian, the economist said UK unemployment could rapidly rise to more than 6 million people, around 21% of the entire workforce, based on analysis of US job market figures that suggest unemployment across

According to economists the fall thus far is consistent with another 1.5% contraction in the third quarter.

And since the definition of a technical recession is two successive quarters of contraction, the manufacturing sector is probably in recession.

Why the UK might already be in recession Property developments are pictured on the Canary Wharf in London on August 9, 2019. - Britain's economy unexpectedly shrank in the second quarter of the year on Brexit turmoil, official data showed Friday, placing the country on the verge of recession and sending the pound tumbling to a 2.5-year low. (Photo by Daniel LEAL-OLIVAS / AFP) (Photo credit should read DANIEL LEAL-OLIVAS/AFP/Getty Images)

Of course, manufacturing is not the biggest sector in the UK economy: that distinction goes to the services sector, which accounts for 80% of GDP - so weak manufacturing performance is no guarantee that the rest of the economy will be similarly affected.

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image captionSome 80 firms with headquarters in Northern Ireland were surveyed. Northern Ireland's construction sector may already be in recession "However it being in place is a crucial enabler to having a sustainable pipeline of work, putting in place multi-year budgets which can provide certainty

Why ? Because every single recession in the past 45 years has seen a yield curve inversion The only thing that has been growing are deficits, which are on pace to hit trillion this year already . But global economic data suggests a global recession may come a lot sooner than anyone anticipated.

All the same, this is a reminder that the economy remains on the brink of genuine weakness.

Why the UK might already be in recession © 2019 Getty Images LONDON, ENGLAND - AUGUST 01: Mark Carney, governor of the Bank of England (BOE), speaks at the bank's quarterly inflation report news conference in the City of London on Augst 1, 2019 in London, England. . The BOE downgraded its growth forecast for this year and next, and warned that a recession is still possible even in the event of a smooth Brexit. (Photo by Chris J Ratcliffe/Getty Images)

And while many will attribute the slowdown to Brexit, the evidence suggests that Britain's decision to leave the EU is only one factor behind the recent slowdown.

Indeed, other countries around Europe are facing similar manufacturing slowdowns, with the manufacturing PMI even weaker in the euro area and Germany than in the UK.

All eyes now on the services PMI, to be released later this week.

They will signal whether the UK is going to avoid that Q3 contraction that would imply a recession or whether manufacturing's weakness is a sign of a broader slowdown around Britain.

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Why the UK might already be in recession

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Recession fears ease as UK economy grows faster than expected.
Recession fears ease as UK economy grows faster than expected

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