LONDON (dpa-AFX) - The UK private sector activity expanded at the fastest pace in three months in January, though it remained lower than the long-run average amid weaker manufacturing production, flash survey results from S&P Global showed on Friday.
The flash composite output index posted 50.9 in January, up slightly from 50.4 in the previous month. A reading above 50 indicates expansion. The expected score was 50.0.
The moderate growth outcome was attributed to a sustained, modest expansion in the service economy that was offset by lower manufacturing production.
The factory Purchasing Managers' Index rose to a 3-month high of 48.2 compared to 47.0 in December. Nonetheless, a reading below 50 indicates contraction, and the expected score was 46.9.
By contrast, the services PMI remained in the growth zone and rose to 51.2 from 51.1. The reading was above the forecast of 50.8.
The overall rise in private sector business activity was mainly on the back of efforts to complete unfinished work, alongside a positive impact from new product launches and successful marketing strategies.
New business across the composite level decreased for the second straight month, and the rate of decline was the fastest since October 2023. The lackluster demand was led by unfavorable domestic economic conditions and rising inflationary pressures.
Apart from that, higher long-term interest rate expectations also had dampened market conditions, the survey said.
Workforce numbers declined further amid cutbacks in both the manufacturing and service sectors, with the latter recording the faster pace of job shedding.
On the price front, cost pressures remained elevated in January, with the rate of inflation accelerating to the highest in just over eighteen months, linked to higher wages, energy costs, and imported raw materials. As a result, selling price inflation rose to the quickest since July 2023.
Looking ahead, business activity expectations weakened further, and the respective index fell to the lowest since late 2022. The lower confidence was especially more evident in the service economy.
The downturn in the forecast of business activity during the year ahead overwhelmingly noted unfavorable UK economic prospects, higher employment costs, and a post-Budget slump in clients' investment spending plans.
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