Data fans slump fears
Weak data with British mortgage approvals at their lowest level in 15 years and the manufacturing sector shrinking for its fourth straight month in August yesterday heightened fears that a UK recession was now inevitable.
The Bank of England said that mortgage approvals, seen as an indicator of future movements in house prices, fell to 33,000 in July from 35,000 in June, below market forecasts for a reading of 35,000.
Approvals are now at their lowest level since the series began in April 1993 and around a third of what they were last year as banks toughen up
lending criteria in response to the credit crunch.
“The ongoing weak manufacturing activity in August heightens belief that the UK economy will contract in the third quarter and is well on its way into recession,” said Howard Archer, chief European and UK economist at Global Insight.
The grim data came as the Chartered Institute of Purchasing and Supply’s purchasing managers’ index showed the factory sector contracted for the fourth month in a row in August, although less sharply than expected at 45.9, up from 44.1 in July. However, the data indicates the manufacturing sector is still shrinking with any reading below 50 meaning that output is falling rather than rising. The survey also showed manufacturers were ramping up prices at the fastest rate since the series began in 1999, as firms continued to pass on some of the impact of their soaring costs. “Overall, a pretty downbeat set of data,” added Jonathan Loynes, economist at Capital Economics.