Pound slumps again as latest financial data shows Britain is experiencing a sharp slowdown in business activity
The pound tumbled as the prospect of a recession loomed amid a slew of bad economic news.
The data revealed a sharp slowdown in business activity, while separate figures showed grocery prices rising at the fastest pace in 13 years. The closely watched S&P Purchasing Managers’ Index (PMI) fell sharply in May to 51.8.
It was down from 57.6 in April and its lowest level since last February and the fourth steepest downturn on record.
The pound fell 0.4% against the dollar to $1.25 after the latest financial data showed a sharp slowdown in UK trading activity
The PMI measures the direction of economic trends in the manufacturing and services sector, with any reading below 50 representing contraction.
The services sector, which includes the travel industry, media and entertainment, suffered the most as customers curbed spending amid uncertainty from soaring inflation amid war in Ukraine .
Thomas Pugh, an economist at business consultancy RSM UK, said a recession would likely be avoided thanks to government support and strong household finances built up during the pandemic.
But he said: ‘This is a clear sign that the economy is likely to worsen after contracting 0.1% month-on-month in March.
Analysts also said the PMI data raises the prospect of stagflation, when slow growth is accompanied by soaring prices.
The pound fell on the news, falling 0.4% against the dollar to $1.25.
Figures from consultancy Kantar showed food price inflation hitting 7%, its highest level since May 2009.
More than a fifth of households say they struggle to make ends meet, with almost all blaming the cost of a weekly shop.
Meanwhile, only one in three buyers consider themselves to be in a “comfortable” financial situation, Kantar found.