Jump in UK sectors enjoying increases in momentum
Firms need to analyse “where to invest in their businesses while still protecting their working capital”.
The number of UK sectors reporting output growth hit a ten-month high in february but firms should have strategies to cope with disruption in the supply chain, according to a report out today.
Companies cited rising demand and spreading business optimism, according to the latest Bank of Scotland UK sector tracker, with ten of the 14 industries monitored reporting output growth last month. This was two more than in January and the most since April 2023.
Software services (57.5) saw output grow at the sharp est rate of any sector, closely followed by financial services (57.4). A reading on the tracker above 50 indicates expansion, and below con traction. Meanwhile, technology equipment (43.2) and tourism and recreation (45.7) saw output shrink at the fastest rates.
Bank of Scotland said output growth in the sectors monitored was driven by growing demand. Its index for demand among such firms, measured by new business, climbed to 53.5 – its highest level since May 2023. However, in manufacturing, new orders fell for an 11 th month in a row (45.4), but the net balance of such companies expecting their output to be higher in a year rose to the highest level since August 2023.
The data provided further indications that global supply chain disruption, along with wage pressures, was potentially starting to increase costs for UK businesses. The tracker’s composite index of input price inflation rose to its highest level in six months, and the rate at which prices charged to customers rose consequently also accelerated marginally, albeit less sharply than input expenses, which Bank of Scotland said suggested businesses were not passing the full extent of cost increases on to their clients.
Nikesh Sawjani, senior UK economist at Lloyds Bank, said: “Growth is continuing to spread to more and more parts of the UK economy. This positive momentum, alongside last week’s GDP data showing the Ukeconomyexpandedinjanuary,providesmoreevidencethat early 2024 is less likely to experience the pattern of economic contraction seen in the second half of last year."