The latest survey from S&P Global/CIPS showed that business activity in the private sector rose in December, reaching a 6-month high, driven by a renewed improvement in order books, alongside efforts to work through post-pandemic backdogs.
The UK composite PMI rose to 51.7 points from 50.7 points in November. Consensus estimates suggested a rise to 50.9 points. The index remains above the 50-point mark, which indicates an expansion of activity in the private sector, for the second month in a row. The services PMI rose to 52.7 points (6-month high) from 50.9 points in November, while the manufacturing PMI fell to 46.4 points (2-month low) from 47.2 points. Economists had expected the services PMI to rise to 51.0 points and the manufacturing PMI to 47.5 points.
Data showed that new orders in the private sector rose slightly in December, recording the first increase since June. Respondents said that the stabilization of interest rates and hopes for a moderate recovery in key economic conditions supported demand, despite the continued indecision of customers regarding spending. Meanwhile, new export orders continued to decline, with manufacturers recording a particularly sharp decline. Private sector employment declined for the fourth month in a row, due to continued economic uncertainty, strong wage pressures and fewer capacity constraints. The backlogs of work continued to decline in December, but at the slowest pace since June. Input cost inflation rose to its highest since August, driven by another sharp rise in operating expenses at service sector companies. Greater input costs led to another robust increase in output charges, with little sign of a slowdown in inflationary pressures since the summer months. The data also showed that private sector companies were generally optimistic about their own growth prospects for 2024. The degree of positive sentiment regarding the prospects for business activity for the coming year reached its highest level since September. This was driven by a further increase in confidence in the services sector, while manufacturers showed the lowest optimism in one year.
Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said that “the UK economy continues to dodge recession, with growth picking up some momentum at the end of the year to suggest that GDP stagnated over the fourth quarter as a whole. While employment meanwhile fell for a fourth month, the decline was only marginal and not indicative of any material rise in unemployment".