London’s composite purchasing managers’ index (PMI) rose from 49.1 in October to 51.9 in November, Lloyds said this morning, through the crucial 50 level that indicates no change, and from decline to expansion.
This London return to growth came with a less impressive countrywide turnaround. The UK-wide PMI climbed from 49.4 in October to 50.4 in November – from slow retrenchment to slow improvement.
“The latest survey results for the country as a whole mark a movement back above 50, signalling output growth in November,” said David Oldfield at Lloyds TSB. “But demand remains muted and uncertainty is still a concern.”
“With backlogs of work falling and pressures on costs continuing, companies are naturally cautious about employment. Many businesses are choosing not to replace leavers, and as a result staff numbers are falling in many areas.”
On a more positive note, Oldfield said price pressures on firms were easing, a claim that was backed up by separate data from BDO. Inflation expectations for the coming quarter were 99.2 in November, according to BDO’s monthly business trends report, down from 100.2 in October, below the 100 mark that signifies trend average, and a 31-month low.
But BDO partner Peter Hemington warned that improved consumer purchasing power was not enough to see businesses bounce back into sustainable growth. “Inflationary pressures are easing, but the UK economy, especially the manufacturing sector, continues to struggle,” Hemington said.
He said the UK’s tax system was excessively burdensome, especially compared to its G20 competitors, and called for new policy incentives to stimulate manufacturing growth.