New gloom for economy

Any hopes that the Office for National Statistics (ONS) had miscalculated in declaring in its initial estimate of gross domestic product for the first…

Any hopes that the Office for National Statistics (ONS) had miscalculated in declaring in its initial estimate of gross domestic product for the first quarter of this year that the country was back in recession tended to be based on other data that had suggested the economy was picking up.

These included positive Markit/Chartered Institute for Purchasing and Supply (CIPS) Purchasing Managers Index (PMI) data. However, the second estimate dashed hopes that the ONS had been too gloomy, as the official quarterly contraction was increased from 0.2 per cent to 0.3 per cent.

That being the case, the latest PMI figures may suggest the end of the double dip is not yet in sight, something that could lead to unemployment starting to rise again soon – and with it more debt management problems as the ability of some to pay off what they owe is diminished by falling incomes. Others may be hit by new pay freezes or shorter working hours.

Construction PMI statistics certainly do not offer much cause for optimism. The sector had seen a near two-year high in March and plenty of confidence in April. But May's data revealed greatly reduced new business, output at a three-month low and a fall in confidence. The overall PMI was 54.4, still indicating growth, but down from 55.8 a month before.

Commenting on the likely impact on jobs, CIPS chief executive David Noble said: "Although still in growth, the marked weakening in new orders since March and April, particularly for larger civil engineering projects, suggests that the recent ramping up of employment in response to work-in-hand may not be sustained."

The manufacturing PMI has also been weak and Royal London Asset Management economist Ian Kernohan suggested this means another "weak quarter" for gross domestic product will be recorded, even without the distortion of the extra bank holiday for the Jubilee.

By Joe White

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