In early 2025, the UK private sector shows slight growth, but business confidence is decreasing, resulting in anticipated job cuts and rising inflation. Economists warn the UK could enter a stagflation period, creating a dilemma for the Bank of England's policy strategies. The latest S&P Global PMI report indicates growth at 50.9 in January but underscores worsening conditions with declining sales and pessimism among businesses. The Chancellor's budget, which included tax hikes, has exacerbated job market challenges, leading to a grim outlook for the economy and further declines in demand.
The subdued business activity seen in January was accompanied by sustained downbeat business optimism about future prospects, the mood remaining the darkest seen for two years.
Inflation pressures have meanwhile reignited, pointing to a stagflationary environment which poses a growing policy quandary for the Bank of England.
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