Recession fears grow following shift in Christmas spending

Economic performance in Greater Manchester declined again in quarter four 2023, according to the findings of the latest Quarterly Economic Survey (QES) conducted by Greater Manchester Chamber of Commerce (GMCC).

The headline Greater Manchester Index, a composite indicator made of key QES measures, decreased to 19.3 (20.4 in Q3 2023). Since Q1 2023, the Greater Manchester Index lost 11 points, which is evidence of a general slowdown in the economy.

The survey of nearly 300 businesses held between November 8, and November 30, 2023, revealed that sales to UK customers decreased in manufacturing and services, while construction showed a marginal improvement.

Manufacturing sector businesses have reported reductions in domestic demand in three continuous quarters.

Businesses in this sector also reported a steep decline in their order books, which indicates that the sector is under some stress at the moment.

The sector has ended the year much weaker than it was at beginning of 2023. Service sector businesses also reported a decline in advance orders from domestic customers. However, at the end of the year, the services sector is stronger than it was at the previous year.

QES data relating to international trade reveals a similar pattern – sales and advance orders both declined in the last quarter of 2022. The overall picture that emerges is one of declining economic activity and uncertainty amongst businesses.

Consistent with declining demand, cash pressures are building up with a lot more businesses reporting a decline in cash positions relative to the previous quarter, and while business confidence declined marginally, other forward looking indicators, such as capital investment and business spending on staff training, show sharper reductions.

Subrahmaniam Krishnan-Harihara, Deputy Director of Research at Greater Manchester Chamber of Commerce, said: “The Greater Manchester Index has now declined in three continuous quarters. International trade data is particularly worrying.

“Businesses in both manufacturing and services reported that export sales and advance orders from overseas customers decreased in this quarter. This is a clear sign that businesses face uncertainty and are less optimistic about growth prospects as they enter the new year. These findings provide valuable context for why the economy is flatlining.”

He added: “Although headline consumer and producer price inflation rates have eased significantly in Q4, businesses still face high input prices. Moreover, they face the risk of a further decline because of the squeeze in business spending and household budgets.

“The good news is that retail sales volumes are estimated to have increased in November and the sales volume for October was revised upwards to 0% (no growth) from an initial estimate of a 0.3% decline.

“Likewise, festive season spending on hospitality and retail are likely to be crucial to how well the economy performs in Q4 2023.

“And on that front, there may be some more bad news: Early indications are that many consumers brought their Christmas spending forward into November 2023, and that post-Christmas retail sales were not sufficient to give a fillip to the economy. If official figures confirm that, Q4 2023 could again record no overall growth and revive worries about a possible recession.”