UK Manufacturing Faces Contraction S&P GMI Reports Stronger Start

29 Jan, 2024

UK Manufacturing Faces Contraction S&P GMI Reports Stronger Start

UK business activity growth has shown a promising trend, accelerating for the third consecutive month in January, according to S&P Global Market Intelligence. The early purchasing managers’ index (PMI) survey data indicate a positive start to the year, with the seasonally-adjusted S&P Global UK composite output index rising from 52.1 in December to 52.5 in January. This increase suggests a sustained output growth for the third consecutive month, signaling optimism for the UK economy to avoid recession.

Chris Williamson, chief business economist at S&P Global, highlighted the significance of this growth trend on the company's website, emphasizing the potential avoidance of recession. However, manufacturing output faced challenges, contracting for the eighteenth time in the past 19 months. The rate of decline accelerated, with factory production falling steeply by more than 2% quarterly.

Weak demand, both domestically and internationally, coupled with rising household expenses, contributed to the decline in manufacturing output. Moreover, disruptions in supply chains, particularly in shipping routes in the Red Sea, added to manufacturing woes, with forecasts suggesting a potential worsening of the situation in the near term.

Despite these challenges, businesses are more optimistic about the year ahead, with confidence reaching its highest level since last May. This renewed confidence signals a positive outlook, surpassing pre-pandemic averages for the first time since May, indicating a potential rebound in economic sentiment and activity.