UK business survey points to Q1 growth and growing confidence

An industry poll released on Friday revealed that British businesses reported a second month of growth in March, indicating that the country’s GDP grew in the first quarter of 2023.

The S&P Global/CIPS UK Composite Purchasing Managers’ Index (PMI), which includes both manufacturing and service businesses, reported a “flash” reading in March of 52.2, down from 53.1 in February but still over the growth threshold of 50.

Reuters surveyed economists, who predicted a reading of 52.8.

While economic forecasts remained dim, Bank of England Governor Andrew Bailey predicted that Britain will now avoid recession this year in an interview that was aired on Friday.

Retail sales data also released on Friday showed stronger-than-expected growth for February and January – though Britain’s Office for National Statistics said this could reflect cash-strapped households cutting back on takeaways and restaurant meals in favour of eating at home.

Many businesses and households are still feeling squeezed.

While the services PMI was in positive territory at 52.8, the manufacturing survey slipped to 48.0, representing its eighth month of contraction.

Firms across the two sectors were more optimistic about their prospects over the next 12 months, with the degree of confidence hitting its highest since March 2022.

The UK economy had seemed to be headed for a recession in early 2023, but Friday’s survey was another step in the right direction. On Thursday, the BoE reiterated its expectation that the UK economy will contract in the months of January and March before rebounding in the second quarter.

Earlier in March, official statistics revealed that the economy unexpectedly resumed growth in January.

While being stronger than in the previous year, a GfK poll of British consumer mood on Friday was nonetheless poor by historical standards.