According to a survey on Tuesday, Britain appears on track to avoid an expected recession as businesses posted an unexpected pickup in activity this month as well as easing price pressures.
The preliminary reading of the S&P Global/CIPS UK Composite Purchasing Managers’ Index (PMI) jumped to 53 in February from 48.5 in January, above the 50 threshold – which shows growth – for the first time since July.
The data exceeded all forecasts of a Reuters poll of more than 20 economists, which pointed to a reading of 49.
Sterling rose against the dollar and British government bond prices fell after the PMI, which beat readings from France and Germany.
“Many expected the UK to be already in recession and the PMI now shows the end of a consistent seven-month contraction trend,” said Rhys Herbert, chief economist at Lloyds (LON:LLOY) Bank.
Although Herbert said there isn’t much to celebrate in the British economy either, slowing inflation could help stave off a recession.
The dominant services sector drove the reading improvement, which financial data firm S&P Global attributed to a recovery in global demand and stability since the market turmoil associated with Liz Truss’s brief tenure.
Crucially for the Bank of England, which is weighing a further interest rate hike, PMI price indices – a good guide to future inflationary pressure – continued to fall, with business costs rising at the slowest pace since April 2021.