Closing summary
The boss of Royal Mail has been recalled to parliament after doubts were raised over the accuracy of evidence he gave to MPs last week.
In a rare move, the business, energy and industrial strategy committee decided to recall Simon Thompson, chief executive of the postal company. Royal Mail has been locked in a months-long dispute with postal workers over pay and working conditions.
UK government borrowing more than doubled in December to £27.4bn, the highest December figure on record, largely because of spending on energy support schemes and higher debt interest payments (also at a record). Big giveaways in the spring budget on 15 March look somewhat unlikely as a result.
Business activity contracted at its fastest pace in two years in January as the high cost of living restricted household spending and companies cut investment, raising the prospect of a UK recession.
The eurozone fared better, where business activity edged into positive territory, while private sector firms in the US recorded a further decline in output at the start of the year.
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Thanks for reading. We’ll be back tomorrow. Take care – JK
Updated
US business activity decline continues in January
Private sector firms in the US registered a further decline in output at the start of 2023, with a renewed pick up in cost pressures, according to latest ‘flash’ PMI data from S&P Global. The fall in business activity softened to the slowest in three months, however, as things improved slightly at both manufacturers and service providers.
The S&P Global PMI improved slightly, but stayed in negative territory. The index rose to 46.6 from 45.0 in December, indicating further declines (any reading below 50 points to contraction).
The @SPGlobalPMI Flash US Composite PMI was 46.6 in Jan, up from 45.0 in Dec. The Services index was at 46.6 (prev 44.7), and the Manufacturing index was 46.8 (prev 46.2). #pmi #economy https://t.co/5YPG563xGl pic.twitter.com/2PbtWI3EfQ
— MTS Insights (@MTSInsights) January 24, 2023
Chris Williamson, chief business economist at S&P Global Market Intelligence, says:
The US economy has started 2023 on a disappointingly soft note, with business activity contracting sharply again in January. Although moderating compared to December, the rate of decline is among the steepest seen since the global financial crisis, reflecting falling activity across both manufacturing and services.
Jobs growth has also cooled, with January seeing a far weaker increase in payroll numbers than evident throughout much of last year, reflecting a hesitancy to expand capacity in the face of uncertain trading conditions in the months ahead. Although the survey saw a moderation in the rate of order book losses and an encouraging upturn in business sentiment, the overall level of confidence remains subdued by historical standards. Companies cite concerns over the ongoing impact of high prices and rising interest rates, as well as lingering worries over supply and labor shortages.
The worry is that, not only has the survey indicated a downturn in economic activity at the start of the year, but the rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures, which could encourage a further aggressive tightening of Fed policy despite rising recession risks.
