In December, the UK private sector sustained steady growth, with an upsurge in services activity counterbalancing a sharper decline in manufacturing output, according to the preliminary survey data released by S&P Global on Monday.
The composite output index remained at 50.5 in December, consistent with November's 13-month low. This stability masked divergent performances between manufacturing and services. The manufacturing Purchasing Managers' Index dropped to an 11-month low of 47.3, down from 48.0 in November, while expectations had anticipated it at 48.4. Conversely, the services PMI increased to 51.4, up from the previous month’s 50.4, surpassing the forecasted 50.9.
Data pointed to challenges such as fragile consumer confidence, tightening corporate budgets, and reductions in non-essential spending. Manufacturing faced a sharp and accelerated decline in new orders, with unfinished work decreasing for the twentieth month in a row, marking the steepest reduction since November 2023. The decrease in staffing was the fastest in nearly four years.
Increased salary costs and heightened domestic inflationary pressures escalated cost burdens, with input price inflation reaching its highest since April. Concurrently, firms raised average prices at the fastest rate in nine months. Business activity expectations for the coming year moderated for the fifth consecutive month in December, with optimism hitting its lowest since December 2022 amid ongoing declines in service sector confidence.
"Although December’s PMI reflects a stagnating economy in the fourth quarter, the lack of confidence and escalating job cuts suggest tougher times ahead as we move into the new year," commented Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
Williamson also noted, "Given the resurgence in inflation, policymakers at the Bank of England might remain wary of cutting interest rates, which could exacerbate downturn risks in 2025."
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