UK private sector firms’ output increased on a month-on-month basis for the first time since July 2022, according to a survey of businesses conducted by S&P Global.
S&P’s CIPS Flash UK PMI Composite Output Index - based on a suvey of 650 manufacturers and 650 service providers - registered at 53.0 for February, the first time the figure has been above the no-change figure of 50 in more than half a year.
Manufacturing output reached a nine-month high, while prices increases were the lowest recorded in almost a year.
A key reason for the growth in manufacturing was a major improvement in supply-chain issues. Supplier delivery times improved at the fastest rate since June 2009.
“Survey respondents cited rising customer demand and improving business confidence in February, due to lower economic uncertainty, fewer supply shortages and falling inflation,” S&P said.
The report also noted that the services sector did especially well.
“Service providers experienced a particularly strong upturn in business activity during February, which contrasted with marginal reductions in each of the previous four months,” it said. “A number of survey respondents commented on stronger demand for business services amid an improving global economic outlook and reduced domestic political uncertainty.
In addition, growth expectations reached their highest levels since March 2022, suggesting businesses felt the UK is less likely to enter a recession. S&P chief business economist Chris Williamson said a recession now appears less likely.
“While many companies continue to report tough operating conditions, especially in the manufacturing sector, the broader business mood has been buoyed by signs of inflation peaking, supply chains improving and recession risks easing,” he said. “The stress created by last autumn’s mini budget is also continuing to work its way out of the financial system.”
He added, though, that interest rates are still likely to rise further, and this may impact growth.
“While the data suggest that near-term recession odds have fallen considerably, elevated inflation pressures clearly remain a concern, especially in the service sector,” he said. “As such, the resilience of the economy and the stickiness of the survey’s inflation gauges add to the likelihood of the Bank of England tightening policy further, and potentially more aggressively, which may dampen future growth expectations and suggests that the possibility of recession later in the year should not be ruled out.”
