The UK’s private sector expanded at its fastest rate in nearly a year this month, fueled by robust growth in the country’s services industry. This new economic data suggests that the UK economy is gaining momentum, indicating a possible exit from the recession that marked the end of 2023.
On Tuesday, the S&P Global/CIPS flash UK purchasing managers’ index (PMI) posted a reading of 54 in April, up from 52.8 in March. This preliminary data is the highest since May last year, and a reading above 50 indicates growth in economic activity, while below 50 suggests contraction.
Chris Williamson, chief business economist at S&P Global Market Intelligence, commented on the results, saying, “Early PMI survey data for April indicate that the UK economy’s recovery from last year’s recession continues to gain momentum.”
Despite the positive trends, Williamson warned that inflationary pressures could complicate the situation, noting, “The upward pressure on inflation will add to concerns that a sustainable path to below-target inflation has not yet been achieved.”
The PMI survey showed that the UK’s service sector experienced its most substantial growth in 11 months, thanks to increased business and consumer spending. This growth offset a renewed downturn in the manufacturing sector, propelling overall business growth to the fastest pace in nearly a year. It suggests that gross domestic product (GDP) is rising at a quarterly rate of 0.4%, compared to a 0.3% gain in the first quarter.
However, manufacturing production declined in April, reversing the growth seen in March. This downturn was attributed to weak market conditions and customer destocking due to reduced demand. Additionally, the data revealed that input price inflation accelerated in April, with the services sector facing the steepest cost inflation since last July.
Williamson noted that businesses took on more workers in response to the economic upturn, but the rise in the National Living Wage and other factors also contributed to increased cost pressures. While the strengthening economy is encouraging, the challenge of managing inflation remains a concern for the UK.
