Number of UK sectors with falling outputs increases, tracker shows

 The number of sectors with growing demand was one less than in November (four) and came as the number of businesses that said inflation was causing them to anticipate lower activity levels in 2025 rose to a 26-month high (10.9 times the long-run average).

The only sectors to report output growth in December were software services (56.7), real estate (53.3) and financial services (51.9). 

These sectors were also the only ones to report demand growth, as measured by new orders (software services (60.4), real estate (54.8) and financial services (54.0).  

A reading on the Tracker above 50.0 indicates expansion, while a reading below 50.0 indicates contraction.  

In December, the Tracker’s measure of overall cost inflation rose to an eight month-high (61.8), with firms citing pressure from wages, IT infrastructure and software, and supplier price increases.

The number of sectors where costs were rising fell by one, month on month (13 in December vs. 14 in November), indicating pressures had become slightly more concentrated in fewer parts of the economy.

Businesses increased their prices charged to customers (55.4) but continued to do so at a slower rate than their own costs were increasing. Tourism and recreation (67.2), which includes pubs, bars and restaurants, saw the sharpest rate of cost (67.2) and price (58.7) inflation.

Nikesh Sawjani, Senior UK Economist at Lloyds, said: “Faced with continued cost pressures, our data suggests that firms are taking decisions to reduce operating expenses in order to protect their margins.

“This could help businesses limit the degree to which they may need to raise prices in the face of fragile demand, allowing them to retain customers rather than seek increased volumes.”