New figures show improvement in economy

The UK appears as though it may avoid recession while business activity in the North West stabilised in December, according to new data.

GDP grew by 0.5 per cent in October and again by 0.1 per cent in November, despite widespread predictions that the economy would contract.

Jonathan Moyes, head of investment research at Wealth Club, said: "Many will be taken by surprise by this announcement. We have seen retailers report stronger than expected earnings reports for Q4 over the past week, and it appears a stronger than expected consumer services and services more broadly have helped the UK economy defy gloomy expectations.

"It may be too soon to mark the beginning of a turn in sentiment for the UK, but a quiet consensus appears to be forming. Energy prices are falling sharply, China is reopening and interest rate expectations have eased significantly.”

However, David Bharier, head of research at the BCC, sounded a more cautious note. He said: "While month-on-month GDP grew by 0.1 per cent, this is a volatile measure. The three-month average, standing at –0.3 per cent,  sends a clearer signal of the current trajectory of the economy. Unprecedented energy costs, new trade barriers with the EU, and lasting damage caused by Covid lockdowns have created the hardest trading conditions for small businesses in recent history.

“Our latest Quarterly Economic Forecast expects five consecutive quarters of recession lasting until the end of 2023, and our most recent business survey points to significant falls in longer-term business confidence. To get back to growth in the long-term, firms will need to see the removal of trade barriers, particularly with the EU, investment in public infrastructure, and measures to improve their access to appropriately skilled staff.”

Meanwhile, in the North West, the private sector economy ended 2022 on a more stable footing, with business activity holding steady in December after three straight months of contraction, according to the latest Regional PMI data from NatWest.

The headline North West PMI Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – registered in line with the 50.0 threshold that separates growth from contraction in December. It was up from 48.5 in November and followed three consecutive sub-50 readings. 

Rising business costs remained a feature of the survey data in December. Panel members commented on higher prices paid for food and energy, as well as citing staff pay demands and the influence of exchange rate factors. The rate of cost inflation remained elevated by historical standards. 

Malcolm Buchanan, chair of NatWest North Regional Board, said: "In the context of three straight months of contraction prior to December, a PMI reading of 50.0, signalling a stabilisation in business activity, is a relatively positive result and shows the region ended the year on a firmer footing.

"On the employment front, the North West went against the broader UK trend and registered a further – albeit modest – rise in employment. Encouragement could also be gleaned from the survey's measures of inflationary pressures, which fell to their lowest since February 2021 and signalled slower price increases than in any other region. Still, despite sentiment recovering further from October's recent low, local firms remain only cautiously optimistic about the outlook amid ongoing concerns about a broad economy slowdown and a squeeze on customer budgets."