(March 24): The UK economy showed tentative signs of shaking off the stagnation that has dogged the Labour government since it took power last summer, according to a closely watched survey.

S&P Global’s purchasing managers’ index jumped to a six-month high of 52 in March, up from 50.5 the previous month and comfortably above the 50 threshold separating growth and contraction. It was much stronger than the unchanged reading expected by economists.

Financial services and early signs of a turnaround in demand for consumer services helped to boost the economy. However, there were still flashing amber lights with employment falling again and confidence remaining subdued. Manufacturing output fell at the sharpest pace in 17 months, as Donald Trump hits major trading partners with tariffs.

S&P said the figures were consistent with quarterly growth of just 0.1%. Still, it pointed to an improvement in the economy after a patchy performance since Labour won a landslide victory in last July’s election. While Prime Minister Keir Starmer has promised to turbo-charge the UK’s lacklustre growth rates, the economy has struggled after a tumble in business and consumer confidence triggered by tax rises in Labour’s first budget.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the figures offered “a respite from the recent flow of predominantly downbeat economic data”.

“The improvement is also being driven by only small pockets of growth, notably in financial services, with consumer-facing businesses and manufacturers continuing to struggle against headwinds both at home and abroad,” he said.

While the services sector powered the economy in March, the threat of a full-blown trade war with the US weighed on the manufacturing sector. Weak demand from abroad caused the quickest drop in manufacturing export sales since August 2023.

Overall private-sector employment declined for a sixth straight month, albeit at a slower pace, ahead of the £26 billion (RM149.45 billion) increase in firms’ payroll taxes and a hike in the minimum wage, which will take effect in April. Confidence in the manufacturing sector slipped to the lowest since 2022, as optimism among services firms rose to a five-month high.

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