Economic growth slows as cost-of-living crisis dents optimism
The latest data for April shows early growth at the start of the year slowed to a three-month low.
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The UK economy grew at its slowest pace for three months as companies saw a marked slowdown in business in the first half of April, according to new data.
The closely-followed S&P Global/CIPS purchasing managers’ index (PMI) flash score for the first two weeks of the month hit 57.6, down from 60.9 in March.
Anything above 50 is seen as an economy in growth.
Respondents to the survey said the UK’s economic recovery from Covid-19 was much weaker due to the slowest rise in new orders from businesses so far this year.
They said clients were holding off on making deals due to the cost-of-living crisis and economic uncertainty caused by the Ukraine war.
The services sector, which includes retail, hospitality and leisure, saw the biggest slowdown, with the business activity index at 58.3 versus 62.6.
Bosses put this down to rising costs as inflation hit and momentum since the easing of Covid-19 restrictions cooled.
Manufacturing remained steady, recording a score of 55.3 versus 55.2 in March, with companies reporting that supply chain problems were easing.
But overall new order levels were a problem, with manufacturers and service sector firms saying consumer demand fell due to squeezed household finances and rising prices for essential items.
Business-to-business sales also faltered due to higher operating expenses, rising inflation and geopolitical uncertainty.
Orders received by manufacturers have almost stalled, driven by an increasing loss of exports, and growth of demand for services has slumped to among the weakest since the lockdowns of early 2021
Inflation has proved particularly difficult, with input prices in manufacturing at their highest in 30 years.
Around 84% of all manufacturing firms reported an increase in their costs since March, along with 66% of all service providers.
Higher transport and utility bills, along with increased wages, were flagged.
Looking forward, businesses said optimism is lower, dropping for the third month in a row to its lowest level since October 2020 with the cost-of-living crisis and the Ukraine war highlighted.
Chris Williamson, chief business economist at S&P Global, said: “The survey data signal a marked cooling in the pace of UK economic growth during April, caused by an abrupt slowing in demand.
“Orders received by manufacturers have almost stalled, driven by an increasing loss of exports, and growth of demand for services has slumped to among the weakest since the lockdowns of early 2021.
“High prices and the associated rising cost of living were often cited as a principal cause of lower demand, with Covid also continuing to affect many businesses.
“Brexit and transport delays were seen as having further impeded export sales, while the Ukraine war and Russian sanctions also led to lost overseas trade.
“Concerns over the worsening inflation picture are meanwhile flamed by another near-record leap in firms’ costs.”
Duncan Brock, group director at CIPS, added: “Concerns over the cost of living and the cost of doing business remain uppermost in the minds of private sector business with inflationary rises the second highest since 1998.
“Prices of some commodities hit record highs, with costs for transport, energy and salaries showing no sign of easing as 84% of supply chain managers in manufacturing reported paying more for their purchases.
“This is an unnerving result for those expecting more consistent recovery in the sector but with the slowest growth in new orders this year, pipelines of work are beginning to look emptier and threaten to affect production in the months ahead.”