Strong UK services lead global stats releases

Mon 5 Feb 2024
Posted by: Benjamin Roche
Trade News

The UK’s services business activity has been boosted by a diminishing recession risk and “supportive economic conditions” according to a new purchasing managers’ index (PMI) published today (5 February) by S&P Global. They’re part of a host of statistics releases the IOE&IT Daily Update is looking at today for a clearer picture of global business and trade.

Services upswing

The PMI numbers show a “solid increase in business activity” for the month of January in services, with increased output supported by a “sustained rise in new orders”. Growing expectation of an interest rate cut from the Bank of England was reported by several respondents to the S&P Global survey, which supported “improved confidence”.

Sustained wage pressures are continuing to impact costs of UK service businesses, though this is offset by lowering fuel inflation, the report suggests. The Business Activity Index, updated monthly, registered 54.3 in January, up from 53.4 in December. This marks “the fastest rate of business activity growth since May 2023”. Increasing demand from consumers and businesses, despite continuing cost of living pressure, is suggested to be responsible for the sustained growth.

Tim Moore, S&P Global Market Intelligence economics director, said:

“A combination of falling inflation and improving order books provided a strong boost to business activity expectations across the service economy. The degree of optimism regarding year ahead growth prospects was the highest since April 2023.

“Another uplift in business confidence in January provides a signal that elevated levels of geopolitical uncertainty have yet to exert much of a constraint on service sector growth projections for 2024.”

Global demand downswing

Numbers released by the German Federal Statistics Office today have shown an unexpectedly sharp fall in the country’s exports, as reported by Reuters.

A Reuters poll predicted a 2% fall in exports for the month of December, but the numbers released today found a drop of over double that, coming in at 4.6%. Making up that number was a 5.5% drop in exports to other EU nations, as well as a 3.5% fall in exports to non-EU countries.

Imports also dropped by significantly more than predicted. Expected to drop 1.5%, the real number was 6.7%.

Pantheon Macroeconomics economist Claus Vistesen called the numbers “recessionary”, while Alexander Krueger, chief economist at Hauck Aufhaeuser Lampe, suggested that geopolitical issues remained a crucial pressure on German export performance.

Inflation predictions

The Organisation for Economic Co-operation and Development (OECD) has also today published its interim economic outlook for 2024, where it has predicted a US inflation rate of 2.2% for the year, followed by a drop to 2% in 2025.

The 2.2% figure is the second-lowest inflation rate for a G7 nation predicted by the body, behind only Italy. The UK fares worse, however, and is predicted to have the highest rate in the group at 2.8%.

Overall falling global inflation will bolster hopes for interest rate cuts. As noted by the FT, however, recent US employment statistics may put the brakes on rate cuts.

The OECD remains confident that most G7 countries will achieve their target inflation rates by the end of next year and has revised predictions from its previous economic outlook to suggest rate cuts will come sooner than previously anticipated. Nevertheless, it warns against loosening monetary policy to pre-pandemic levels, warning that near-zero interest rates could spark renewed inflation.

The hit to global trade of the ongoing disruptions in the Red Sea is projected to contribute 0.4% to the rate of global inflation, the OECD adds.

EV acceleration

There was positive news for the UK’s car industry today, as the Society of Motor Manufacturers and Traders (SMMT) released statistics showing that the UK had put its one millionth battery electric vehicle (BEV) on the road.

The new car market grew 8.2%, with 142,876 new cars registered in January 2024, a boost of 10,882 compared to the same time last year.

The BEV boost was a “testament to the commitment of manufacturers to deliver ever-increasing numbers of zero emission models”, the SMMT said.