In September, five of the 14 sectors monitored by the Lloyds UK Sector Tracker saw output grow; this was six fewer than in August (11), and the lowest number since October 2023.
The monthly Tracker also asks firms about factors linked to the growth of and demand for their business. In September, business optimism over economic conditions 12 months from now rose to a 31-month high (1.51 times the long-run average). In addition, firms’ expectation that output would be higher in a year’s time remained above the long-term average (72.1 in September).
The Tracker’s Uncertainty Index, which measures the number of mentions in the monthly PMI panel of any sort of uncertainty, was marginally above the long-term average for the second month in a row (1.41 times the long-term average in September vs. 1.48 in August). Poorer weather also hampered growth, according to panellists, indicating that September’s reduced number of sectors in growth mode was likely reflective of temporary factors, not long-term pressures.
Nikesh Sawjani, Senior UK Economist at Lloyds, said: “The drop in the number of UK sectors reporting output growth in September is notable, although uncertainty was only marginally above trend. With the economy showing positive signs, this suggests that the dip in activity across some sectors could prove to be temporary.”
Food and drink manufacturing and software & services surge ahead
Food and drink manufacturing posted the fastest output growth (66.1 vs. 60.6 in August) in September, supported by the strongest rate of demand growth (66.5 vs. 71.8 in August). A reading on the Tracker above 50.0 indicates expansion, while a reading below 50.0 indicates contraction.
Software services followed closely behind, with sharp output growth (61.9 vs. 56.6) driven by expansion in new orders (62.7 vs. 59.6). Other sectors that saw output expand were financial services (55.0), metals and mining (52.4) and chemicals manufacturing (51.5).
Aled Patchett, Head of Consumer at Lloyds, said: “A damper-than-average month translated into weak demand for some consumer-facing sectors, including hospitality. Firms will hope for cautious optimism in the final months of the year, with many already setting their sights on targeting festive spend to make up for any losses they may have experienced.
“One area that management teams will be closely tracking is supply pressure. This month’s data brought increasing reports of rising shipping costs and shipping delays amid ongoing geopolitical tensions; therefore, plans may be needed to mitigate any potential impact if pressures persist or worsen.”
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