Calls mount for more economic stimulus from Rishi Sunak as UK bounce back over the summer fades away

MAJOR economies across Europe, including the UK, are rapidly losing momentum putting pressure on governments to offer more stimulus, the latest analysis show.

Already fading hopes of a V-shaped recovery took another hit today when closely watched economic figures showed that the summer recovery is running out of steam.

Fresh lockdown measures announced last night added to the concern.

The IHS Markit/CIPS PMI index for September fell to 55.7 from 59.1 in August.

While any number above 50 signals improvement, the figures were not as good as the City hoped. The all-important services sector fell further still, from 58.8 to 55.1, reflecting the end of the Eat Out to Help Out scheme.

PMI’s for the eurozone were even worse, falling from 50.5 to 47.6.

Thomas Pugh, UK economist at Capital Economics said: “It now seems likely that the UK restrictions will set back the economic recovery and cause GDP to stagnate in quarter four. But the big risk is that the government has to go further. For example, a two-week national lockdown could reduce the level of GDP by 5% and set back the economic recovery by a year.”

Simon French at Panmure Gordon thinks the figures will deteriorate from here. He said: “Despite the summer recovery, sentiment remains fragile. Many businesses will be looking at investment and hiring decisions and concluding that a delay of six months may be sensible.

“That will directly reduce growth over the next two quarter. This is likely to be the high water mark for PMIs for some time.”

The well respected French added: “Chancellor Rishi Sunak is going to have to open the Treasury chequebook once again to support the UK economy. We expect proposals to be announced later this week.

“This is sensible economically and will support livelihoods still caught up in a suspended reality.”

Jarek Sklodowski, senior trader at Financial Markets Online, said: “The Eurozone recovery has stalled before it even reached third gear.

“Two months of surging growth and optimism have come screeching to a halt, with the summer’s impressively v-shaped recovery giving way to a flatlining sense of uncertainty in September.”

Other figures out this week are likely to show that pay is falling as unemployment soars.