BRITS reining in spending amid a historic inflation surge has steered the UK economy to the edge of "stagnation", a closely watched survey released yesterday showed.

S&P Global's flash composite purchasing managers' index (PMI) dropped to an 18-month low of 50.9 this month, down from 52.1.

The figures indicate "the economy is already in recession," Paul Dales, chief UK economist at Capital Economics, warned.

Weaker consumer and business spending in response to a darkening economic outlook hit both the UK's services and manufacturing industries.

Pubs, bars and restaurants and other service providers notched the shallowest increase in activity in 18 months, sending the industry's headline PMI slightly lower to 52.5.

However, manufacturing output slumped to 42.4, pushing its PMI to 46 from 52.1, the biggest monthly fall since the first Covid-19 lockdown in April 2020, meaning the industry is shrinking.

A reading above 50 points indicates most firms reported growth.

Experts said firms are being spiked by households cutting back to protect their budgets.

Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said: "The UK private sector moved closer to stagnation in August, as mild growth of activity across the service sector only just offset a deepening downturn at manufacturers."

The latest PMI indicates the UK economy is hurtling toward a long slump, caused by a huge inflation leap.

Living costs are rising faster than wages, likely triggering a future spending slowdown.

Wall Street bank Citi said earlier this week inflation will peak at a near 50- year high of 18.6 per cent in January.

(c) 2022 City A.M., source Newspaper