The purchasing managers’ index, an authoritative business leaders’ survey, suggests private sector output expanded in December for the second month running. The latest economy-wide composite PMI survey reads 51.7, up from 50.7 last month – with readings above 50 pointing to economic growth.
The manufacturing-focused PMI index fell to just 46.4 this month, down from 47.2 in November – as factories endure high electricity costs and ongoing skills shortages. While still in the world’s top 10, our manufacturing sector contracted during December for the 10th successive month.
The UK service sector, however, driving four fifths of GDP, registered a December PMI reading of 52.7 – up from 50.9 last month and the highest since June. That signals at least some GDP growth when official figures are published for November and December – with the UK, in my view, continuing to avoid recession.
As inflation has eased, commercial lending rates have already come down – not least for mortgages and corporate loans. Lenders don’t believe official warnings the MPC won’t lower rates until the end of next year – yet another sign of the Bank of England’s cack-handed communications strategy.
The widespread view the Bank will start dropping rates sooner helps explain why, as inflation has fallen, demand has begun to recover over the last two months – particularly tech spending, financial services, travel and leisure.
This year is ending with the Bank of England’s base lending rate at a 15-year high and the economy flat. But there are signs of revival. We’re heading for GDP growth of around 0.2pc during 2023 as a whole – sluggish, indeed, but it could have been much worse.
The reality is, though, that the UK’s economic performance during 2024, and the impact on both the timing and outcome of the upcoming general election, rests heavily on the broader global outlook.
During the two decades prior to the 2020 lockdown, the world economy expanded on average by 3.8pc a year. Global GDP grew just 3.5pc in 2022 and is set to slow to 3pc this year, according to the International Monetary Fund, before falling to 2.9pc in 2024 – way below the historic average.
