For the first time since last summer, activity in the British economy is gaining momentum. Figures released on Friday point to a recovery. The UK Manufacturing and Services Composite Purchasing Managers’ Index (BMI) rose to 53.1 in February from 48.5 in January.
Last month’s total is also slightly better than the value previously calculated from the partial quick survey, which was 53.0. The mid-market forecast predicted that the composite index in February will be 49.0.
In its final BMI assessment in February, S&P Global stressed that the new composite activity index indicated a recovery in the private sector of the British economy.
BMIs above 50 indicate an increase in activity in the sectors studied, readings below 50 indicate a decrease in activity, so the summary data of 53.1 in February indicates a significant recovery in the UK business sector.
The services sector, which generates 80% of the UK’s gross domestic product (GDP), showed strong momentum in the BMI Composite Index in February. The sector activity index increased from 48.7 in January to 53.5 in February. This is also slightly better than the preliminary estimate of 53.3.
The final Manufacturing BMI in February was 49.3, up from 47.0 measured in January, indicating that manufacturing activity continued to decline, but minimally, and the new figure reached is still a seven-month high.
The latest real economic data also came in better than expected and indicated that the UK economy is now narrowly out of recession, contrary to previous expectations. According to the latest estimates from the British statistical office ONS, the British gross domestic product (GDP) stagnated in the fourth quarter of last year, that is, it did not increase, but did not decrease compared to the third quarter.
In the third quarter of last year, the UK economy fell 0.3%, and according to the generally accepted technical definition, a recession occurs if GDP falls for two consecutive quarters. However, despite the latest optimistic figures for February, analysts in London continue to expect that the British economy will not avoid a recession in the future.
Global financial advisory firm EY ITEM Club’s revised winter outlook for the London Institute for Economic Research predicts that the UK, the largest European economy outside the EU, will experience a 0.7% contraction in 2023.
However, EY also emphasizes that it expects the British economy to grow from the second half of this year.
