Data released by S&P Global/CIPS showed that activity in the UK private sector increased markedly in January, exceeding economists' forecasts, and reaching the highest level since May 2023.
The UK composite PMI rose to 52.9 points from 52.1 points in December. Economists had expected growth to 52.5 points. Meanwhile, the services PMI increased to 54.3 points from 53.4 points in December. Consensus estimates suggested an increase to 53.8 points. Both indices are above the 50-point mark, which indicates an expansion of activity in the sector, for the third month in a row.
The report showed that higher levels of output were supported by a sustained rise in new orders in the service sector. Survey respondents typically commented on improved confidence among clients due to strengthening economic conditions and expected interest rate cuts. Overall, new orders in the service sector grew at the fastest pace since May 2023. Export orders also increased in January, with higher demand from Asia and the United States helping to offset the deteriorating business situation in the eurozone. Meanwhile, employment in the service sector grew at the fastest pace since July 2023. Increased recruitment mostly reflected efforts to boost business capacity and process unfinished work. As for the inflationary situation, the rate of input cost inflation matched its level recorded last October and was therefore the joint-lowest for nearly three years. This contributed to the slowest rise in prices charged by service sector firms since last September. The data also indicated improved optimism about the business outlook over the next 12 months. About 52% of respondents predict an increase in business activity during 2024, while only 12% predict a decrease. This signals the strongest degree of positive sentiment since April 2023.