The latest survey from S&P Global/CIPS showed that business activity in the private sector rose in January, reaching a 7-month high, helped by the sharpest expansion in service sector activity since May. The survey also indicated a return of modest private sector employment growth at the start of 2024.
The UK composite PMI rose to 52.5 points from 52.1 points in December. Consensus estimates suggested a rise to 52.2 points. The index remains above the 50-point mark, which indicates an expansion of activity in the private sector, for the third month in a row. The services PMI rose to 53.8 points (8-month high) from 53.4 points in December, while the manufacturing PMI rose to 47.3 points (9-month high) from 46.2 points. Economists had expected the services PMI to fall to 53.2 points and the manufacturing PMI to increase to 46.7 points.
Data showed that new orders in the private sector rose moderately in January, with the growth rate reaching its highest level since May 2023. A number of firms suggested that increased optimism about the UK's economic prospects helped support business and consumer spending despite budget constraints due to increased inflationary pressures. The data also pointed to a modest increase in private sector employment in January after a 4-month decline, and also reflected a further reduction in the backlog of work across the private sector. Meanwhile, manufacturing supply chains were impacted by longer wait times for container freight during January in the wake of the Red Sea crisis. Latest data pointed to the steepest lengthening of vendor delivery times since September 2022, which ended an eleven-month period of steady improvement. Supplier delays were overwhelmingly linked to longer international shipping times as vessels rerouted away from the Suez Canal. As for the inflationary situation, prices charged by private sector firms increased at the weakest pace since last October. UK businesses were more upbeat about the growth outlook for the next 12 months. The degree of confidence was the highest since May 2023, with both manufacturers and service providers signaling rising business optimism at the start of the year.