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UK economic activity slides as interest rates hit demand

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UK economic activity unexpectedly fell for the first time since the start of the year as higher interest rates hit demand, according to a closely watched survey.

The flash UK composite purchasing managers’ index, a measure of the health of the economy, was 47.9 in August, down from 50.8 in July and below the neutral 50 threshold for the first time since January.

Line chart of Purchasing managers' index, below 50= a majority of businesses reporting a contraction showing UK private sector output falls at fastest rate since January 2021

This was much lower than the 50.3 forecast by economists in a Reuters poll.

Chris Williamson, chief business economist at S&P Global Market Intelligence, which publishes the figures, said: “A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival.”

The figures follow recent more resilient economic data, including better than expected statistics for public borrowing and growth.

This is a developing story

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