IMF: Chancellor hit by double whammy

2nd August 2011

The Financial Times (paywall) reports that bad economic news "bombarded the Treasury" as new International Monetary Fund forecasts cast doubt on the chancellor's deficit reduction plan.

Ajai Chopra, the IMF mission chief to the UK, raised the possibility that further spending cuts and tax rises would be needed; the IMF declared that the cost-cutting measures already enacted by the coalition government were not enough to halt a further economic slowdown.

The IMF's damning announcement came as the UK's manufacturing sector suffered its first contraction in two years.

As reported in The Guardian the Markit/CIPS manufacturing purchasing managers' index put activity at 49.1 – a figure below 50 signifies contraction. Analysts' had forecast a figure of 51.

Rob Dobson, senior economist at Markit said July's data was "a marked turnaround from the strong start made to the year".  

More from our blogger Shaun Richards on UK economic growth.

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