Recession looms in UK and Europe but car sales lift economy

Fears of a global recession intensified yesterday as the cost of living took a toll on companies in the service sector.

Surveys showed that the dominant sector – ranging from bars and hotels to lawyers and accountants – contracted again last month in the UK, the eurozone and the US.

According to data from the Purchasing Managers Index (PMI), UK GDP looks set to contract by 0.4 percent in the last quarter of the year, following a 0.2 percent decline in the third quarter.

That would mean Britain is in a recession, which is defined as two consecutive quarters of decline.

“This is the toughest period the UK economy has faced since the global financial crisis, barring only the peak of the pandemic,” said Chris Williamson of S&P Global Market Intelligence, who compiled the study.

The index recorded a reading of 48.8 in November, with 50 marking the boundary between growth and contraction. That was unchanged since October and the second month in a row of decline.

Businesses pointed to “caution among firms and tightening of household belts in the face of ongoing cost-of-living challenges,” although confidence had “improved somewhat” since the chaos of September’s mini-budget.

New car sales rose 23.5 percent last month compared to a year earlier, a much-needed boost for the economy.

According to the Society of Motor Manufacturers and Traders (SMMT), 142,889 new cars were registered in November.

There was strong demand for commercial vehicles and electric vehicles. However, that was still 8.8 percent below the pre-pandemic level in 2019.

SMMT chief executive Mike Hawes said “urgent action” was needed to spur the switch to electric vehicles and investment in a charging network.