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UK Private Sector Expands For First Time In 5 Months

ukpmi aug03 24jan20 lt

The UK private sector returned to growth in January as the receding political uncertainty lifted new orders, survey results from IHS Markit and the Chartered Institute of Procurement & Supply showed Friday.

The flash composite output index rose to a 16-month high of 52.4 in January from 49.3 in December.

The headline reading registered above the crucial 50 score for the first time since August 2019. The score was also above the forecast of 50.7.

The survey is indicative of GDP rising at a quarterly rate of approximately 0.2 percent in January, representing a welcome revival of growth after the malaise seen in the closing months of 2019, Chris Williamson, chief business economist at IHS Markit, said.

"It seems likely that the rise in the PMI kills off the prospect of an imminent rate cut by the Bank of England, with policymakers taking a wait and see approach as they assess the performance of the economy in the post-Brexit environment," Williamson added.

The rebound in the PMIs and the prospect of a further boost from fiscal policy in the Budget on March 11 will probably be enough for the BoE to decide that the economy is moving in the right direction and it doesn't need an extra push from lower interest rates, Paul Dales, an economist at Capital Economics, said.

The service sector expanded at the fastest pace in more than a year and the manufacturing sector moved closer to stagnation.

The services Purchasing Managers' Index advanced more-than-expected to 52.9 in January from 50.0 a month ago. The expected level was 51.1.

At the same time, the manufacturing PMI improved to 49.8 from 47.5 in the previous month and above the forecast of 48.8.

New work grew the most since September 2018 as reduced political uncertainty following the general election had a positive impact on business and consumer spending decisions at the start of the year.

Employment numbers advanced for the second straight month. Additional staff hiring was underpinned by a sustained rebound in output growth projections with business optimism hitting highest since mid 2015.

Input price inflation was the highest for four months. Average prices charged by firms increased at the fastest pace since May 2019.

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