- UK preliminary PMI survey strongest of the year
- GfK consumer confidence index at its highest level since February 2022
- Retail sales fall but rain is seen as a factor
- The British economy is seen as a laggard among its competitors
- Next Bank of England interest rate decision in May
LONDON, April 21 (Reuters) – British businesses reported their busiest month in a year and consumers grew more confident, according to surveys released on Friday, which helped to show signs of a recovery in the economy, which has so far defied forecasts of a recession.
The preliminary reading of the S&P Global/CIPS UK Composite Purchasing Managers’ Index (PMI) also showed the slowest input cost inflation in over two years, but price pressures look strong enough for the Bank of England to hike rates again next month.
The PMI — which includes services and manufacturing companies — rose to 53.9 in April from 52.2 in March, for the third straight month above the 50 line, marking growth and the strongest growth since April last year .
Economists polled by Reuters had forecast a lower reading of 52.5.
“The key takeaway is that the economy as a whole not only showed encouraging resilience, but gained growth momentum in the second quarter,” said Chris Williamson, chief operating officer at S&P Global.
The PMI was driven by the services sector as consumer spending on travel, leisure and entertainment was strong while manufacturing remained weak.
Williamson said the survey equated to quarterly GDP growth of 0.4%.
Last month, the BoE said it expected modest economic growth in the second quarter of 2023 but still forecast a contraction in the first quarter.
Borrowing costs are widely expected to rise for the 12th straight meeting in May as it continues to struggle with inflation above 10%.
The International Monetary Fund this month forecast the UK economy would contract by 0.3% in 2023, a less severe hit than the previous forecast but still the sharpest contraction among the world’s major rich economies this year.
S&P Global’s input price index – a good guide to future inflationary pressures – showed the slowest growth in corporate costs since March 2021, although overall cost pressures remained high by historical standards.
There were also signs of a rebound in pollster GfK’s Friday consumer confidence survey, which rose to its highest level since February last year, albeit from weak levels.
Consumer expectations for the UK economy over the next 12 months hit a 15-month high and rated their financial outlook as the best since February 2022.
“The better prospects of what the broader economy has in store for us… could even be viewed as the proverbial ‘green shoots of recovery,'” said Joe Staton, client strategy director at GfK.
Official retail sales data, also released on Friday, recalled the troubles faced by many consumers.
March sales volumes fell a more-than-expected 0.9% from February, but some of the weakness was attributed to rainy weather and the impact of high inflation.
Darren Morgan, economics director at the Office for National Statistics, said the overall trend in retail sales was less muted than the March figures alone suggested.
“A strong performance by retailers in January and February means the three-month picture shows positive growth for the first time since August 2021,” he said.
Reporting by Suban Abdulla; Editing by Hugh Lawson
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