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UK Private Sector Remains In Contraction For Third Month

The UK private sector activity deteriorated for the third successive month in October as output continued to fall amid woes of higher interest rates, squeezes in household budgets, and falling exports, the purchasing managers’ survey results from S&P Global and the Chartered Institute of Procurement & Supply showed Tuesday.

The flash CIPS composite output index rose slightly to 48.6 in October to 48.5 in the previous month. However, any score below 50 indicates contraction in the sector.

The latest reading signaled a modest reduction in private sector output, which contrasted with an upward trend on average during the first half of 2023, the survey said.

Both the manufacturing and service sectors experienced lower output, with the former showing a steeper rate of reduction.

The manufacturing PMI came in at a 3-month high of 45.2 in October versus 44.3 in the previous month.

The services business activity index fell to a 9-month low of 49.2 in October from 49.3 in September.

British service providers indicated the weakest level of business activity since January amid subdued consumer confidence, the impact of elevated borrowing costs, and weak client demand across the real estate sector.

The manufacturing output decreased for the eighth consecutive month in October, which was the longest decline since 2008/09.

In October, private sector firms witnessed modest reductions in new order volumes and employment numbers. Lower demand was attributed to caution among corporate clients and stretched household budgets due to cost-of-living pressures.

Furthermore, weaker export sales impacted overall demand, especially in the manufacturing sector.

On the price front, input price inflation eased further in the private sector economy to the lowest since the start of 2021, as a result of the softening of cost pressures across the service economy, alongside falling purchasing prices in the manufacturing sector.

On the other hand, selling price inflation accelerated to a three-month high in October, driven by a sharp and accelerated increase in output charges across the service economy.

“An improvement in input cost inflation was not enough to stem the haemorrhaging of business margins, as higher salary demands were still present and rising fuel bills offset falling prices for raw materials,” CIPS Chief Economist John Glen said.

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