UK retail sales rise, while PMI services data disappoints

Despite stronger consumer confidence numbers, today’s data indicates recessionary risk for the UK.

22 September 2023

The UK consumer showed some signs of a mini-resurgence in August with consumer confidence numbers coming in better than expected. However, before the government pats itself on the back, we should remember that it is still in negative territory and consumers in general are still struggling with the cost of living. Retail sales rose 0.4%, pretty much in line with forecast following the 1.1% decline in July due to the wet weather, so arguably a bit of pent-up mean reversion. Compounding the confusion in this data dump this morning, PMI data disappointed on the services side with a reading of 47.2, much lower than the forecast and just contractionary number of 49.3. With manufacturing in the UK also deep into contractionary territory there is a pervading sense of recessionary risk gloom surrounding the UK economy and it is noticeable that the private sector is shedding jobs at the fastest pace since March 2009, if you ignore the pandemic related collapse. It should be no wonder that sterling cannot catch a bid at the moment. While Prime Minister Sunak may be a bit liberal with the truth and u-turn on the green agenda recently, it is much to his chagrin that he cannot engineer an about-turn in the fortunes of the UK economy.