As the new year approaches, the UK remains exposed to elevated recession risks, despite a slight uptick in business growth this month, according to recent economic data.
The latest survey of purchasing managers at UK firms reveals a marginal return to growth in November, ending three months of contraction as the Flash UK PMI composite output index, tracking overall economic activity, rose to 50.1 from October's 48.7, the first time in four months it exceeded the 50-point mark indicating stagnation.
While the services industry experienced growth and manufacturing contracted at a slower rate, concerns linger as reduced discretionary consumer spending and cost-of-living pressures impact sales and as total new work has decreased for the fifth consecutive month while businesses raised prices in November, passing on wage inflation and higher fuel costs.
Despite a pause in interest rate hikes and a slowdown in inflation measures, the survey suggests the UK GDP may remain broadly flat in the final quarter of 2023, prompting concerns for the Bank of England about persistent domestic inflation pressures.
The situation for the bank of England remains precarious and it appears that the recent tax measures announced by the chancellor will do little to help the average consumer that might find themselves struggling with higher bills as the new year approaches. The risk of recession remains high and unless we see a significant rebound in economic activity with a strengthening consumer the possibility for further weakness for the UK economy will continue to increase leaving the central bank with even fewer choices.
