The UK government’s budget surplus reached a record high in January on higher tax revenues, data published by the Office for National Statistics showed on Wednesday. However, the surplus is still below the government’s estimate.
The public sector registered a surplus of £16.7 billion, according to the report. The figure slightly missed economists’ forecasts for a surplus of more than £18 billion but is still double the figure this time last year. The longer-term picture for the UK public finances remains challenging, however, as overall public debt skyrocketed during the pandemic.
Meanwhile in the US, the minutes of the January Federal Reserve monetary policy meeting show that policymakers acknowledged that there had been “significant progress” in reducing US inflation.
However, some policymakers highlighted that strong growth in spending and employment could disrupt that progress. At the meeting, Fed officials not only decided that the key overnight borrowing rate should remain unchanged but also changed the post-meeting statement to indicate that the Fed will not cut interest rates until it held “greater confidence” of inflation slowing down.
Economic data released over the last three weeks has confirmed the Fed officials’ reluctance to reduce interest rates, while investors are hoping for an imminent and sustained series of rate cuts.
A recent Labour Department report showed the US economy had added twice as many jobs than expected in January while inflation also came in above expectations.
Finally, preliminary results of a S&P Global survey showed on Thursday that the eurozone private sector contracted at the slowest rate in eight months in February.
The region’s manufacturing Purchasing Managers’ Index fell from 46.6 in January to 46.1 in February, missing economists’ expectations for a reading of 47.1 and signalling further contraction.
On the other hand, the services PMI reached the neutral level of 50.0 from the previous reading of 48.4, exceeding expectations of 48.7 and reaching a seven-month high. This better reading in services contributed to the composite PMI rising from 47.9 in January to 48.9 February, reaching an eight-month peak. However, this still points to a slight overall economic contraction.
The malaise in the eurozone economy is far from over at the moment, but the PMI results indicate that some further improving in the service sector could help the region avoid another quarter of contraction.
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