Positive Outlook for UK Economy
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that “the UK economy continues to dodge recession with growth picking up some momentum at the end of the year.” The increase in GDP during the final quarter suggests that the economy did not stagnate during the period.
It is worth noting, however, that the economy is experiencing a two-speed situation, with manufacturing contracting sharply while services rebound. Financial markets are anticipating rate cuts for the upcoming year.
Services Sector Performance
The PMI indicates that business activity in the services sector rose to 52.7 from 50.9, its highest reading since June. This is only the second time since July that the index exceeded the 50.0 growth threshold. Conversely, the manufacturing sector’s reading fell to 46.4, partially reversing the improvement seen in November and marking the 17th consecutive month of contraction.
While new business growth offset the decline in manufacturing orders, staffing levels continued to decrease for the fourth consecutive month.
Central Bank and Inflation
The survey offered some relief to the Bank of England (BoE) by indicating a slight slowdown in services price inflation, a metric closely monitored by the central bank. The gauge of output price growth in the sector decreased from 58.2 to 57.7, although it still remains high when compared to historical standards.
Caution Amid Positive Signs
The cautiously positive sentiment reflected in the composite index, including the strongest expectations for output in three months, aligns with other encouraging signs in the largely sluggish British economy. These include increased consumer confidence in December and the indication that the housing market slowdown has potentially bottomed out.
Despite these positive indicators, the overall outlook remains one of modest economic growth, with incremental improvements in various sectors.