The UK’s private sector has made a surprise return to growth, according to the initial findings of a closely-watched survey.
The marginal upturn, as reported by the S&P Global/CIPS flash UK purchasing managers’ index (PMI), comes following three months of decline – and amid expectations from economists that the slump would continue.
S&P Global said the improvement was the result of a return to business activity expansion in the service economy – which includes hospitality firms, banks and estate agents – alongside a softer downturn in manufacturing production.
The Bank of England’s decision to freeze interest rates and the recent decline in the rate of inflation also likely contributed, experts said.
Initial findings from the survey, of manufacturers and service providers, recorded a PMI score of 50.1 for November. Any figure above 50 suggests growth.
It is higher than the 48.4 forecast by experts, according to Pantheon Macroeconomics, and above October’s figure of 48.7.
Tim Moore, economics director at S&P Global, said the PMI survey suggested that the UK economy had “found its feet again in November”.
He said: “Relief at the pause in interest rate hikes and a clear slowdown in headline measures of inflation are helping to support business activity, although the latest survey data merely suggests broadly flat UK GDP [gross domestic product] in the final quarter of 2023.”
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However, the risk of recession is likely to remain heightened into the new year, as total new orders for businesses declined for the fifth month in a row, Mr Moore said.
There were also renewed signs of sticky inflation in November, with both input costs and output prices increasing at faster rates than the month before, according to the survey.
Dr John Glen, chief economist for the Chartered Institute of Procurement & Supply (CIPS), said: “November’s data reveals welcome signs of calmer waters ahead for the UK economy, albeit with indications that there is still a little way to go before we are completely out of the inflationary storm.
“However, challenges persist for UK manufacturing, with subdued demand leading to decreasing production volumes.”
Firms polled said areas of economic strength included company spending on technology investment and business services. However, they said consumer confidence appeared to remain low amid cost of living pressures.
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Ashley Webb, from Capital Economics, said the PMI score of 50.1 was at a level that “historically has been consistent with a contraction in real GDP”, but said “activity isn’t weak enough to significantly reduce inflationary pressures”.
He added: “Overall, today’s release will add to the Bank’s unease about the stickiness of inflation.
“This supports our view that core inflation and wage growth will fall only slowly and that the Bank of England won’t cut interest rates until late in 2024.”
Final PMI figures for November will be published early next month.
The initial “flash” figures are based on between 80% and 90% of the total responses from the poll of 650 manufacturers and 650 service providers.
