Private Sector Expansion Moderates Slightly in March

Private Sector Expansion Moderates Slightly in March

21 Mar    Finance News, News

In a continuation of the ongoing recovery from recession, the private sector in Britain expanded for the fifth consecutive month, albeit at a slightly slower pace in March compared to the previous month.

Survey data from purchasing managers revealed that the output index dipped marginally to 52.9 in March from 53 in February, slightly below the consensus forecast of 53.1. However, the figure remained above the key threshold of 50, indicating growth in the private sector.

The moderation in overall private sector growth was primarily driven by a slowdown in the services sector, which reached a three-month low of 53.4, down from 53.8 in February. Notably, the services sector plays a significant role in economic growth and employment, accounting for three-quarters of economic growth and 80% of employment.

On the other hand, the manufacturing sector came close to ending its 20-month downturn, with the index rising to 49.9 from 47.5, surpassing economists’ expectations.

Chris Williamson, chief business economist at S&P Global, highlighted the encouraging signs of a more broad-based expansion, with sustained growth in the service sector and tentative signs of growth in manufacturing output. He estimated that economic output likely expanded by around 0.25% in the first quarter.

Despite the positive indications from the Purchasing Managers’ Index (PMI) figures, Williamson noted that there was no indication of a rapid easing of inflation. Stubbornly high service sector inflation, coupled with renewed inflation in manufacturing, suggests persistent underlying price pressures.

Thomas Pugh, an economist at RSM UK, described the economic recovery as fragile, anticipating a more substantial pickup in growth in the second half of the year. This optimism is based on expectations of lower inflation, declining interest rates, and tax cuts stimulating consumer spending, thereby improving business confidence and overall economic conditions.

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Meanwhile, in the eurozone, the equivalent PMI reading rose to a nine-month high of 49.9, signaling a modest improvement. However, the bloc remained in contractionary territory for the 10th consecutive month, with strong services activity offset by a more severe downturn in manufacturing.

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