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UK business activity picks up in December, avoiding recession fears

The UK economy showed signs of life in December, with both manufacturing and services sectors expanding at a faster pace than the previous month. The S&P Global/Cips flash UK PMI composite output index rose to 51.7 in December from 50.7 in November, the fastest rise in private sector business activity since June.

The increase was driven by the services sector, which rose to 52.7 in December from 50.9 in the previous month. This is the highest reading for the sector since April. Manufacturing activity also increased, but at a slower pace, with the index for manufacturing dropping to 46.4 from 47.2 in November.

UK business activity picks up in December, avoiding recession fears

This suggests that the UK economy may not have contracted in the final quarter of the year, as had previously been feared. The Bank of England had forecast that GDP would stagnate in the final three months of the year, but today’s PMI data suggests that it may have grown by a small amount.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “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.”

He added that the services sector is likely to continue to grow in the coming months, but that the manufacturing sector is likely to remain weak. This is due to factors such as overstocked customers and supply chain disruptions.

John Glen, Cips chief economist, said: “A revival in the services economy is helping the UK’s private sector end the year on a more positive note. However, the continued struggles in manufacturing add a tone of caution as we look ahead to 2024.”

Despite the positive signs in December, there are still significant challenges facing the UK economy. Inflation is high and is expected to remain so for some time. The war in Ukraine is also causing uncertainty and could have a negative impact on growth.

However, the PMI data suggests that the UK economy is more resilient than had been expected. If the services sector continues to grow and manufacturing activity stabilizes, then the economy may be able to avoid a recession in 2024.

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