The downturn could speed up in January, say experts.
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The downturn across British businesses has eased slightly this month, apart from for manufacturers, and companies have reported the weakest cost pressures since mid-2021, a survey showed on Friday.
The UK S&P Global Composite Purchasing Managers' Index (PMI) rose unexpectedly to 49.0 from 48.2 in November, although it remained below the 50 threshold denoting growth. A Reuters poll of economists had pointed to a reading of 48.0.
The dominant services sector drove all the improvement as the decline deepened among British manufacturers, which cut jobs for the first time since October 2020.
Overall the survey fitted with other signs that the economy is contracting at a slow pace that is not worsening, with price pressures easing further from historically high levels.
The survey came a day after Bank of England officials raised interest rates and indicated that more hikes were likely, despite a looming recession, as the central bank tries to bring down inflation that hit a 41-year high in October.
"The December data add to the likelihood that the UK is in recession, with the PMI indicating a 0.3% GDP contraction in the fourth quarter after the 0.2% decline seen in the three months to September," S&P Global chief business economist Chris Williamson said.
The composite PMI's gauges of inflation for both businesses' input cost and their selling prices fell to their lowest levels since mid-2021.
The PMI for the services sector rose to 50.0, indicating stagnation, from 48.8 in November.
Factories, which account for less than 10% of economic output, fared worse. The manufacturing PMI slid to 44.7 from 46.5, marking its lowest level since May 2020 - during the depths of the first COVID-19 lockdown.
"It's no surprise to see that businesses are battening down the hatches, most notably by reducing headcounts, in a sign that the downturn not only has further to run but could yet accelerate again, especially given December's further hike to interest rates," Williamson said.