The UK private sector expanded for the first time since July 2022, and at the fastest pace in eight months in February, amid the improving customer demand and business confidence as inflation and supply shortage concerns cooled, results of the closely watched purchasing managers’ survey by S&P Global revealed Tuesday.
The S&P Global/Chartered Institute of Procurement & Supply flash composite output index climbed to 53.0 in February from 48.5 in January. The expected score was 49.0.
A reading above 50 indicates expansion, while any score below 50 suggests contraction in the sector.
Manufacturing and services both experienced an upturn in activity, with the latter posting the fastest growth, the survey said.
The services Purchasing Managers’ Index, or PMI, also rose to an eight-month high of 53.3 in February from 48.7 in the prior month. Economists had forecast a score of 49.2.
The manufacturing PMI advanced to a 7-month high of 49.2 from 47.0. Economists had expected a reading of 47.5.
The UK private sector witnessed lower economic uncertainty in February, as easing supply shortages and falling inflation helped to improve customer demand and business confidence.
Overall cost burdens increased at the slowest pace since April 2021. Meanwhile, the selling price inflation eased only fractionally, especially in the service economy.
The rate of job creation in the private sector was the sharpest since October 2022, largely driven by the additional staff hiring in the service sector.
Growth expectations in the year ahead showed positive trends in February, with the respective index rising to the highest since March 2022, led by improving sales pipelines, the restart of delayed projects and signs of a recovery in business investment.
“As such, the resilience of the economy and the stickiness of the survey’s inflation gauges add to the likelihood of the Bank of England tightening policy further, and potentially more aggressively, which may dampen future growth expectations and suggests that the possibility of recession later in the year should not be ruled out,” Chris Williamson, chief business economist at S&P Global, said.
Elsewhere on Tuesday, the Industrial Trends Survey from the Confederation of British Industry revealed that the UK manufacturing output declined in February at the fastest pace since September 2020, and selling price expectations slowed to the lowest since early 2021.
A net balance of -16 percent of manufacturers said output volumes declined in three months to February compared to -1 percent in three months to January, This was the weakest balance since September 2020.
Nonetheless, manufactures expect output to rise moderately in three months to May, with the balance rising to +7 percent.
Further, the survey showed that the order book balance rose marginally to -16 percent in February from -17 percent in January. But this was weaker than economists’ forecast of -14 percent.
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