Bloomberg News

U.K. Output Index Declines to Level Signaling Contraction

July 09, 2012

A U.K. output index fell in June to a level indicating the economy will continue to shrink, while business confidence dropped to the lowest this year, according to BDO LLP.

The gauge estimating output over the coming quarter declined to 94.8 from 96.7 in May, while the sentiment measure fell to 93.5 from 95.5, the accountancy firm said in a report published today in London. The output index is below the 95 mark that points to positive growth in three months, “suggesting more difficult economic terrain is ahead,” BDO said.

The Bank of England expanded its bond-purchase program last week as it stepped up efforts to lift Britain out of recession. The economy shrank for a second straight quarter between January and March and the central bank said recent indicators “point to a continuation of that weakness in the near term.”

U.K. industrial production probably fell 0.2 percent in May after stagnating in April, according to the median forecast of 28 economists in a Bloomberg News survey. Factory production probably slipped 0.1 percent. The Office for National Statistics will publish the data at 9:30 a.m. tomorrow.

Continuing Turmoil

The decline in the BDO sentiment index in June takes it to the lowest since December. The company said that the “ongoing unresolved” turmoil from the debt crisis in Europe is “likely to be weighing on business confidence, particularly among manufacturers.” An employment measure fell to 94.3 in June from 94.9 in May, while a gauge of inflation expectations rose to 103.3 from 102.6.

The BDO indexes are calculated by the Centre for Economics and Business Research from a weighted average of all the U.K.’s main business surveys in past month.

A separate survey today by Lloyds Bank showed Britons’ assessment of employment prospects rose to minus 53 last month from minus 59 in May. Lloyds’ index of consumers’ job security increased 2 points to minus 14.

In another report, KPMG LLP and the Recruitment and Employment Confederation said their index of hiring of full-time staff dropped to 46.8 in June, the lowest in almost three years, from 51 in May. Readings below 50 indicate contraction.

To contact the reporter on this story: Fergal O’Brien in London at fobrien@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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