Growth is slowing and price pressures are mounting. Consumers are anxious and an important commodity is in short supply. That was the state of the UK in the mid-1970s, when a single word was used to describe a combination of recession and a rising cost of living: stagflation.

And, in a much milder form, it is the malaise that is afflicting the economy today. The shortage is of computer chips rather than crude oil but the latest snapshot from IHS Markit/Cips suggests businesses again face supply and demand constraints.

To be sure, an incurable optimist could put a decent gloss on the latest purchasing managers’ index. The economy is growing at a relatively healthy pace, firms are taking on more staff, and there are some signs that price pressures are abating.

The reality is much less upbeat. Activity, according to purchasing managers, has slowed for a third month and by more than was expected by a survey of economists. Reported incidents of output being curtailed by shortages of labour or materials are 14 times higher than usual and the highest since the PMIs were first produced in 1998.

That’s the supply problem. The demand problem is that Covid-19 has not gone away despite the warmer weather and the NHS vaccine programme. Case numbers are going up not down, and that’s making consumers nervous.

It is a classic double whammy. On the one hand, businesses are being forced to pay higher wages to plug labour shortages. On the other, demand is starting to ease. The economy will continue to grow at a fair lick in the third quarter of 2021 but at a much less rapid pace than the 4.8% seen in the second quarter.

That double whammy could easily become a triple whammy if the economy struggles to cope with the withdrawal of government support. Rishi Sunak has no intention of scrapping his plan to wind up the furlough scheme next month and sees no reason why he should, given record job vacancies.

But it is easy enough to envisage a scenario in which consumers decide eating out or a visit to the cinema is not worth the risk, especially with firms jacking up their prices to cover higher wage costs. Britain’s bout of mini-stagflation will probably get worse before it gets better.

US buyout specialists prefer UK to other European countries

With a private equity bidding war for Morrisons in full swing, it was only a matter of time before other supermarkets attracted the attention of takeover merchants. Shares in Sainsbury’s have risen to a seven-year high after a weekend report that it was being eyed up by the US buyout specialists, Apollo.

There are reasons why UK grocery chains are attracting all this attention: they have big and lucrative property portfolios; they generate lots of cash; and they look cheap at current market valuations.

That last point applies not only to supermarkets but to UK plc as a whole. London’s market has lagged Wall Street, and rich valuations of companies in the US has meant American private equity has been looking around the world for where bargains can be found. The Chicago-based global law firm Mayer Brown says there were 65 takeovers of UK firms by US private equity companies in the past year, up from 37.

The weakness of the pound, reflecting the sluggish performance of the economy since Brexit, is one reason why US firms have alighted on the UK rather than other European countries. Another is a shared Anglo-Saxon business model, with the UK more open to private equity than Germany or France.

US private equity firms, according to Mayer Brown, like the UK’s flexible labour market because it makes it easier to “restructure” workforces, and that rings true. Bidders for Morrisons have been keen to dispel the idea that they see the supermarket as ripe for cost-cutting and asset-stripping. But as Mandy Rice-Davies might have said: they would, wouldn’t they?