(IN BRIEF) Despite facing widespread cost pressures, the UK economy showcased resilience in April, with eight out of 14 sectors experiencing output growth and seven reporting increased demand, according to the latest Lloyds Bank UK Sector Tracker. While one sector saw a decline in output growth compared to March, the overall trend suggests stability or potential growth in Q2 GDP. Rising costs, particularly in areas like staff expenses and shipping, were noted across all sectors, leading to price increases in 13 out of 14 sectors. Analysts highlight the importance of monitoring these cost and price trends, especially concerning their impact on inflation and future monetary policy decisions. Management teams are advised to focus on supply chain management, pricing strategies, and working capital to navigate ongoing challenges and seize emerging opportunities in the coming months.
(PRESS RELEASE) LONDON, 20-May-2024 — /EuropaWire/ — The number of growing UK sectors remained resilient in April, despite cost pressures spreading across the economy, according to the latest Lloyds Bank UK Sector Tracker.
In April, eight of the 14 UK sectors monitored by the Tracker saw output growth – one fewer than in March (nine), but still more than the monthly average in 2023 (seven).
Financial services, which includes banks, insurers, and investment services firms, posted the fastest output expansion (61.6 vs. 56.2 in March), followed by software services (55.3 vs. 56.6) and commercial and professional services (53.3 vs. 52.1).
In each of these sectors, output growth was supported by stronger customer demand, as measured by new orders.* In April, seven sectors saw demand grow – the same number as in March.
Cost pressures spread
These results came despite all 14 monitored sectors seeing their costs rise in April – three more than in March (11) and the first time every part of the UK economy has seen costs increase since December 2022.
Higher staff costs were cited as being a pressure in April by manufacturers (11.91 times the long-run average vs. 5.51 times in March) and service sector businesses (3.07 vs. 1.77 times in March). Shipping was also a key cost driver for manufacturers (cited by 3.56 times the long-run average of firms vs. 3.86 times in March).
The tourism and recreation sector – which includes pubs, bars and restaurants – experienced the sharpest rate of input cost inflation (77.9 vs. 69.6 in March).
Amid such widespread cost increases, 13 out of the 14 sectors monitored also raised their own prices – the most since January 2024 and two more than in March (11). Food and drink manufacturing was the only sector to reduce prices in April, albeit at a slower pace than the month before (48.9 vs.48.5).
Nikesh Sawjani, Senior UK Economist, Lloyds Bank, said: “As well as highlighting resilience, this month’s data suggests that the economy entered Q2 on a solid footing.
“Past UKST data shows that since the pandemic, when more than half of sectors have begun the quarter in growth mode – as it has here – GDP has held or grown.
“That being said, the cost and price trends we’ve uncovered here will be something closely watched by the Bank of England as it considers its next steps with interest rates. Sustained cost pressure could mean more businesses have no choice but to raise prices, which could have a bearing on the overall inflation outlook.”
Scott Barton, Managing Director, Lloyds Bank Corporate and Institutional Banking, said: “It’s a testament to firms’ strength and flexibility that so many sectors are still achieving growth in what remain challenging conditions, particularly when it comes to costs.
“As we look to the months ahead, management teams will need to keep a laser focus on factors like supply chain performance, inventory, pricing strategy and working capital to ensure that they’re in the best position to weather headwinds, and capitalise on new opportunities.”
Media Contact:
Lorna Gilmour
0207 356 2374
lorna.gilmour@lloydsbanking.com
SOURCE: Lloyds Bank plc
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