Summary
- The Combined Purchasing Managers Index for the UK, which includes services and manufacturing sectors, shows a slight increase to 53.0 from January’s 52.9, as reported by S&P Global.
- February’s PMI for the service sector dipped slightly but still maintained its second-highest reading since May 2023.
- A technical recession during the latter half of 2023 is predicted to reverse into a weak positive growth, aided by falling energy prices and faster wage growth.
- Future economic measures are due to be announced by the British finance minister, Jeremy Hunt.
- Fast growth in order books for service firms indicates consumer optimism over potential Bank of England interest rate cuts.
- The fastest rise in input prices within the composite survey since the previous year could impact future monetary policy decisions by the Bank of England.
Details on PMI for British Sectors
PThe S&P Global composite Purchasing Managers Index that encompasses both services and manufacturing sectors in the UK witnessed a marginal increase to 53.0 coming up from 52.9 in January.
Snapshot of the Service Sector’s Performance
The finalised PMI for the service sector in February decreased slightly to 53.8 from 54.3 in January. Although marginally lower than the forecasted February estimate of 54.3, it holds as the second-highest reading since May 2023.”
An Optimistic Economic Future
Economics Director at S&P Global Market Intelligence, Tim Moore, noted a robust expansion of business activity across the service sector in February. This points towards a potential rebound for the UK economy after experiencing a technical recession in late 2023.
The British economy went through a downturn during the third and fourth quarters of 2023. However, decreases in energy prices and wages growing at a faster pace than inflation predict a shift to modest but positive growth.
Expected Economic Measures
Jeremy Hunt, the British finance minister, is anticipated to introduce strategies to stimulate the economy in an upcoming budget statement. These measures will be pivotal for Prime Minister Rishi Sunak in securing an election win later this year.
Consumer Optimism and Monetary Policy
Survey results from Tuesday highlighted swift growth in the order books of service firms, displaying heightened consumer optimism due to the possibility of reduced interest rates by the Bank of England. The central bank, however, would also have to consider the rapid rise in input prices, which could influence their decision.
Bank of England officials indicated the likelihood of the first rate cut since the pandemic, conditioned on evidence of reduced inflation pressures, especially lower wage growth.
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