**London**: The UK’s private sector growth reached a six-month high in March, buoyed by a resurgence in services. However, weak manufacturing and ongoing global trade tensions pose significant challenges, indicating a complex economic landscape ahead of Chancellor Rachel Reeves’s Spring Statement.
In March, the private sector growth in the United Kingdom reached a six-month high, marking a notable uptick in the economy ahead of Chancellor Rachel Reeves’s upcoming Spring Statement. The UK PMI Composite Output Index, which measures economic activity, rose to 52.0 from 50.5 in February, indicating a modest expansion in economic activity. The boost was largely influenced by a resurgence in the services sector, which saw its PMI Business Activity Index climb to 53.2, the highest level recorded in seven months. However, the manufacturing sector continues to face challenges, with output levels falling to a concerning 17-month low, as reported by S&P Global.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted, “An upturn in business activity in March brings some good news for the government ahead of the Chancellor’s Spring Statement, offering a respite from the recent flow of predominantly downbeat economic data.” Despite this growth, he expressed caution, stating that the improving figures should not be conflated with a broader recovery, emphasising that current growth is concentrated in specific sectors, particularly financial services, while manufacturers are struggling with “severe headwinds.”
The downturn in manufacturing is partly attributed to weakened international demand, leading to the sharpest decline in export sales since August 2023. This contraction comes amid rising global economic uncertainty and concerns regarding possible US tariffs that could further impact trade. Furthermore, private sector employment fell for the sixth consecutive month, attributed to business restructuring, increased automation, and not replacing staff due to rising payroll costs—impacts signalling the strain from new national insurance rates imposed by the government.
In the United States, Donald Trump announced a new “secondary tariff” on countries purchasing oil and gas from Venezuela, set to take effect on 2 April, which has already influenced the oil market, with Brent crude rising to $72.83 per barrel. Trump’s tariff, a 25% levy on Venezuelan energy imports, aims to pressure the regime over its alleged support for criminal activities in the US, notably the Tren de Aragua gang which has been classified as a Foreign Terrorist Organisation. In response, oil traders are anticipating a scramble among Venezuela’s current customers to procure supplies from alternative sources to avoid incurring the tariff.
Concerns over escalating trade disputes are not limited to Venezuela; Gabriel Makhlouf, the Governor of the Central Bank of Ireland, expressed significant worries regarding a looming trade conflict between the US and the EU. He highlighted the risks of increased prices, slowed economic growth, and job losses, pointing to the uncertainty surrounding the impacts of US tariffs on Ireland’s economy while emphasising the need for sound decision-making in the face of volatility.
In the same vein, the latest S&P Global Flash PMI report from the United States signals troubling trends in manufacturing, with the sector experiencing a decline as new orders nearly stalled. Although service sector activity has contributed to an overall improvement in the composite PMI for the US, Williamson warns of the fragility of this growth, emphasizing that many businesses remain cautious about the economic outlook, which could lead to further challenges ahead. The dual pressures of increasing costs due to tariffs and weakening consumer demand are contributing to a dimming business confidence.
As the financial markets respond to these developments, the implications of both domestic economic adjustments in the UK and international trade disputes stemming from US policy shifts underscore a complex landscape that businesses and policymakers must navigate.
Source: Noah Wire Services
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