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PMI Figures Suggest Deep Recession but Pound and FTSE Showing Signs of Recovery

As the UK ramps up its lockdown to try and get the coronavirus outbreak under control, the country’s purchasing managers’ index (PMI) has dropped to a record low. However, the FTSE 100 and Pound Sterling showed some signs of improvement as the new measures across the country came in to place.

The Full PMI Details

A flash PMI carried out on March’s figures showed the British economy shrinking more quickly than at any time in the last 2 decades. In fact, the contraction is more rapid than at any point since this index was first made available more than 20 years ago.

From the 53.2 seen in February, the UK PMI has collapsed to just 35.7. Bear in mind that anything under 50 reflects a period of recession. Worst affected was the service sector, which makes up a high proportion of the country’s economy. This dropped from 53.2 to 35.7.

The manufacturing PMI was less dramatic, going from 51.7 to 48.0. However, this figure is slightly mis-leading, as it takes into account a long period of delay in terms of supplies. The sector is likely to see companies using the debt collection process to try and stay afloat during this period.

Output across the UK has crashed, while business expectations are down massively. All of this leads to the worst performance since this type of survey was first made available in 1998. It is a far deeper collapse than was seen in the global crisis of 2008.

Many Other Countries Are Suffering Too

With business all over the planet closed and people restricted to their homes, it is no surprise to see that other countries and regions are staring at bleak economic figures too.

The preliminary PMI numbers from the Eurozone show it plunging from 51.5 in February to a record low of 31.4 in March. This includes services at 28.4 and manufacturing at 39.5.

However, this PMI was calculated using data that was gathered up to the 23rd of the month. So the final numbers may be even worse than this.

Japan and the US have also seen economic slumps that suggest a deep, worldwide recession is almost certain this year. The Japanese government is working on a stimulus package to be launched at the end of March. Meanwhile, Donald Trump is considering easing restrictions to get the American economy on track again.

Signs of Recovery?

A piece of good news came from the Bank of England. While they have warned of a “more severe” impact than can be calculated, their FPC minutes suggest that British banks should be solid enough to get through it relatively unscathed.

Their recent stress tests involved simulating a 4.7% drop in the country’s GDP and unemployment rising by over 9%, as well as house prices falling by 33% and the Pound losing 30% against the Dollar.

At the time of writing, GBP is making a decent recovery against the USD. It has climbed back up to over $1.17. With the FTSE 100 climbing to over 5,200, these are some signs of recovery to cling onto. However, it seems inevitable that a global recession is on the way.