The United Kingdom is charting a course for a double-dip recession this winter and a far worse economic outlook in 2021.
The manufacturing and services sectors are both still reeling from the COVID-19 crisis. Economic growth almost came to a standstill in October even before the government announced the latest lockdown.
Financial data company IHS Markit said its IHS Markit/CIPS services Purchasing Managers' Index fell to a four-month low of 51.4 in October from 56.1 in September. Its preliminary reading for October came to 52.3.
"October data indicates that the UK services sector was close to stalling even before the announcement of lockdown-two in England," said IHS Markit economist Tim Moore.
"The UK economy seems on course for a double-dip recession this winter and a far more challenging path to recovery in 2021," according to Moore.
He said the new orders component in the services PMI fell sharply, which was surprising. Business firms have now shed jobs for the eighth month in a row.
The composite PMI sank to 52.1 from 56.5, also weaker than the initial flash estimate.
The weaker PMI still represents bad news, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
"Hopes of a V-shaped recovery are dead and buried," he said.
Tombs, however, predicts a 0.7% drop in fourth quarter gross domestic product, followed by a 2.0% improvement in the first three months of 2021.
The Bank of England expects the economy to shrink by 2% in Q4, and by 11% for the full-year 2020. Over the long term, the pandemic's huge economic destruction will reduce the U.K.'s economic output to about 1.75% this year.
Gross domestic product is not expected to exceed the level it reached in all of 2019 until the first quarter of 2022.
The UK's gross domestic product plunged by 20.4% during the second quarter due to lockdowns, the biggest decline in any major advanced economy. The slump also pushed the UK officially into an economic recession in August, its first in 11 years.
The recession gutted consumer spending while devastating manufacturing, services and construction. Chancellor Rishi Sunak said back in August the government was "grappling with something that is unprecedented" and that it was "a very difficult and uncertain time."
The economy quickly recovered early in the third quarter before COVID-19 cases surged in the ongoing second wave. The gap between the recession in August, the scant recovery in September and the projected plunge in gross domestic product in October qualifies as a definition of a double-dip or a "W-shaped recovery."
A double-dip recession is a recession followed by a short-lived recovery, followed by another recession. A reliable indicator of a double-dip recession is gross domestic product falling back to negative after a few quarters of positive growth.
