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Britain\u2019s economy kept up its early 2024 momentum with a survey showing strong growth for services firms and business optimism at a two-year high, but inflation pressures are likely to keep the Bank of England wary about cutting borrowing costs.<\/p>\n
Adding to signs that Britain\u2019s shallow recession of last year is likely to be short-lived, the preliminary February S&P Global\/CIPS UK Composite Purchasing Managers\u2019 Index (PMI), which spans services and manufacturing firms, rose to 53.3, the highest in nine months, from January\u2019s 52.9.Economists polled by Reuters had forecast no change from January\u2019s reading.But there were potential areas for concern for the BoE in the survey including strong growth in wages among services firms and Red Sea tensions hitting factory supplies, pushing a measure of price increases by businesses to its highest since July.Among services firms, the PMI\u2019s headline measure held at 54.3. Manufacturing remained below the no-growth threshold of 50.0 but edged up to 47.1 from 47.0 in January.Chris Williamson, S&P Global Market Intelligence\u2019s Chief Business Economist, said the survey pointed to the economy growing by 0.2 per cent or 0.3 per cent in the first three months of 2024 after contracting in the third and fourth quarters of last year.That is likely to be a relief for Prime Minister Rishi Sunak who has had to endure taunts of \u201cRishi\u2019s recession\u201d from the opposition Labour Party which is riding high in opinion polls ahead of a national election expected later this year.Williamson said the pick-up was being led by demand for financial services amid expectations of imminent rate cuts while manufacturing activity continued to contract and consumer-facing services firms were still battling cost-of-living pressures.\u201cWith growth accelerating and prices on the rise again, February\u2019s data mean policymakers are increasingly likely to err on the side of caution when considering the appropriateness of cutting interest rates,\u201d he said.Williamson said there was a risk inflation gets stuck at its most recent level of 4 per cent rather than fall to the BoE\u2019s 2 per cent target soon, as widely expected.The central bank this month signalled that the time might be approaching for cuts to its benchmark lending rate which is at its highest since 2008. But most policymakers are still looking for evidence that inflation pressures will not persist.Alex Kerr, an economist with Capital Economics, said a faster rise in prices charged by services firms suggested services inflation \u2013 which is being closely watched by the BoE \u2013 would ease only gradually to about 5.0 per cent in six months\u2019 time.\u201cThis will add to the Bank of England\u2019s unease about lingering domestic price pressures,\u201d Kerr said but added he still thought the BoE would start cutting rates this summer.Investors are pricing a 50 per cent chance of a first quarter-point rate cut in June and fully pricing in a cut by August, little changed from before the PMI was published.The survey showed average cost burdens increased in February at the fastest pace for six months, pushed up by higher labour costs as well as rising freight costs for manufacturers which were linked to the Red Sea crisis.Overall, new business increased at the fastest pace since May last year but companies were cautious about hiring due to the strong increases in pay.Follow the
\nCyprus Mail on Google News<\/p>\n","protected":false},"excerpt":{"rendered":"
Britain’s economy showed strong growth in early 2024, with a survey indicating high business optimism and robust growth for services firms. The preliminary February S&P Global\/CIPS UK Composite Purchasing Managers\u2019 Index (PMI) rose to 53.3, marking the highest in nine months. The survey highlighted potential concerns for the Bank of England, including wage growth among services firms and supply issues due to Red Sea tensions, leading to the highest measure of business price increases since July. The services PMI remained at 54.3, while manufacturing edged up to 47.1 from 47.0 in January. The economy is expected to grow by 0.2% or 0.3% in the first quarter of 2024, following a contraction in the last two quarters of the previous year. Inflation concerns are likely to make the Bank of England cautious about reducing borrowing costs, with inflation potentially remaining at 4% rather than dropping to the 2% target. The central bank has signaled the possibility of rate cuts, but inflation pressures are being closely monitored. Investors anticipate a 50% chance of a rate cut by June, with a cut fully expected by August. The survey also noted increased business costs due to higher labor and freight costs, attributed partly to the Red Sea crisis, and a cautious approach to hiring due to rising pay.<\/p>\n","protected":false},"author":3,"featured_media":3200,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"Default","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[47,195,186,357,33,3,26,250,67,187,839,634,375,701,468,494],"class_list":["post-3199","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cyprus","tag-bank-of-england","tag-britain","tag-business","tag-businesstop","tag-companies","tag-cyprus","tag-economy","tag-google","tag-inflation","tag-international","tag-labour","tag-opinion","tag-rate-cut","tag-red-sea","tag-tensions","tag-uk"],"acf":{"keyphrase":"","keywords":"","sourceimg":"","country-category":""},"yoast_head":"\n