London economy steams ahead to top UK growth league and on track to avoid recession
London’s economy is racing ahead of the rest of the UK and is on track to power the country’s GDP out of its current slump, new figures out today show.
The capital’s purchasing managers’ index (PMI) shot up to 56 points last month, up sharply from 50.5 points and far above the 50 point threshold that separates growth and contraction, according to lender NatWest.
That reading was the highest in Britain and far above the country-wide PMI of 53 points. The north east registered the lowest reading at 50 points.
A ramping up in consumer spending has fortified London’s economy, signalling high inflation and interest rates are not chilling demand as much as feared at the turn of the year.
Most economists just a couple months ago were forecasting households to rein in spending in response to the cost of living crisis eroding their incomes at among the quickest paces on record.
That fall was projected to fuel a slow burning recession.
But several pieces of data of late have signalled London and the UK could swerve a much-tipped recession this year.
Catherine Van Weenen, Natwest London and the south east regional board, said: “The surprisingly marked uplift in business activity during February added to evidence that the capital has begun the year in a much better place than at the end of 2022.”
New order growth in London hit its highest level in nine months, encouraging the capital’s companies to take on more staff, reversing the first drop in employment in nearly two years at the end of last year.
“Higher activity was predominantly linked to a sharp rise in client demand, leading firms to up their forecasts for future activity to an 11-month high,” she added.
NatWest’s figures illustrated price pressures are continuing to ease, helped by energy bills tumbling and supply chains coming back online.
“The rate of increase in input costs across the London private sector economy softened for the third month in succession in February, and was the weakest seen since September 2021,” the survey said.
But firms did raise prices for the second straight month, indicating elevated inflation could stick around.