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UK News Bank of England cuts growth expectations for economy

03:15  24 september  2021
03:15  24 september  2021 Source:   dailymail.co.uk

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The Bank of England cut its growth expectations for the economy on the same day that data showed Britain's business bounce-back lost more momentum in September.

The recovery has been losing steam in recent weeks amid rising Covid cases, staff shortages and soaring costs.

The closely watched Composite Purchasing Managers' Index (PMI) from IHS Markit, which measures activity in both the manufacturing and services sectors, gave a reading of 54.1 – meaning growth in output slowed to its lowest level in seven months.

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Any number above 50 indicates growth. This was down from 55 in August, and was the lowest reading since lockdown restrictions began to ease. The glum data came as the Bank of England cut its expectations for growth in the third quarter of the year by around 1 per cent, meaning the economy at the end of September will be around 2.5 per cent smaller than pre-pandemic.

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Chris Williamson, chief business economist at IHS Markit, said: 'The September data will add to worries that the UK economy is heading towards a bout of 'stagflation', with growth continuing to trend lower while prices surge ever higher.

'While there are clear signs that demand is cooling since peaking in the second quarter, the survey also points to business activity being increasingly constrained by shortages of materials and labour, most notably in the manufacturing sector but also in some services firms.

'A lack of staff and components were especially widely cited as causing falls in output within the food, drink and vehicle manufacturing sectors.'

Despite worries over rising inflation, the Bank of England voted yesterday to keep interest rates at their record low of 0.1 per cent and carry on with its £895billion money-printing programme.

Rising inflation and labour market issues give BoE pause for thought

  Rising inflation and labour market issues give BoE pause for thought July saw a record jump in the rate of consumer price inflation, which rose well above the BoE's 2 per cent target to a nine-year high of 3.2 per cent. The BoE has said it expects inflation to rise to around 4 per cent by the end of 2021, before falling lower.BoE Governor Andrew Bailey recently revealed than half of MPC members now believe the initial conditions have been met to open the possibility of raising interest rates. There are also two new members of the committee in this month’s meeting, raising uncertainty further.

But in a sign that rate hikes could be on the horizon, two of the Bank's nine-member Monetary Policy Committee voted to cut short this so-called quantitative easing, over fears it could be adding to inflation. Supply chain hold-ups piled pressure on small businesses especially.

The Federation of Small Businesses (FSB) is publishing a report today calling on the Department for International Trade (DIT) to direct support to smaller firms. It wants the Government to make international trade advisers more accessible to tiny companies, and to promote the benefits of international trade deals and make sure they are accessible to those firms.

FSB chairman Mike Cherry said: 'Small exporters have had a difficult time due to the pandemic, supply chain issues and adapting to the complications associated with the end of the transition period.

'This has left many facing rising costs, unsure of the future of their small firms and debating the best way to grow and nurture their businesses.

'Our report has highlighted some key areas which we hope DIT can act upon to positively help small firms who are either looking to begin their exporting journey, or to help current exporters to thrive.'

Read more

House price growth slows but first-time buyers priced out .
In the year to September, the average cost of a home across the country increased by 10 per cent to £248,742, against an 11 per cent rise in the year to August, fresh figures from Nationwide show.In the year to September, the average cost of a home across the country increased by 10 per cent to £248,742, against an 11 per cent rise in the year to August. Month-on-month, prices rose by 0.1 per cent.

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