In a positive turn of events, economic growth has become more widespread across the UK’s private sector, reaching a ten-month high in February.
According to Lloyds Bank’s monthly economy tracker, ten out of 14 sectors experienced an increase in output last month, marking the most extensive growth since April 2023. Notably, software and financial services led the pack, benefiting from heightened demand and expanded output. This surge underscores the resilience of the UK’s services sector, a significant driver of the economy, which has been buoying growth since 2022.
The data also aligns with mounting evidence suggesting that the UK economy has rebounded from the mild recession observed towards the end of the previous year. January’s growth figures indicated a 0.2 per cent monthly expansion, while private sector surveys reflect growing business confidence and a moderation of inflationary pressures.
Nikesh Sawjani, senior UK economist at Lloyds Bank, views this positive momentum as a sign that early 2024 is less likely to witness the economic contraction experienced in the latter part of 2023.
This positive outlook coincides with the upcoming interest rate decision by the Bank of England, expected to maintain the base rate at 5.25 per cent for the sixth consecutive month. The Bank’s stance is largely influenced by wage growth trends across the economy, with average earnings growth dipping to a four-month low in February, as indicated by the Lloyds survey.
While the services sector flourishes, challenges persist in the manufacturing industry, grappling with inflationary pressures and a sluggish domestic and global economy. Although manufacturing reported growth overall, new orders declined, leading to a depletion of backlogs of unfinished work. Additionally, businesses cited proactive increases in production in response to improving demand conditions.
Forecasts from industry groups like Make UK and professional services firms like BDO highlight the ongoing challenges facing British manufacturers, projecting modest growth amid weak export demand and Brexit-related disruptions.
The Lloyds survey also revealed that some manufacturing firms have raised prices in response to supply chain disruptions, particularly those stemming from disruptions to Red Sea shipping routes. Input price inflation reached a six-month high in February, with shipping delays hitting levels unseen since 2022.
While the economic landscape presents both opportunities and challenges, the broad-based growth observed across sectors signals a promising trajectory for the UK economy in the months ahead.
