LONDON, Feb 21 (Reuters) – British businesses reported a surprise pick-up in activity this month as well as easing price pressures, according to a survey on Tuesday that suggested the economy may be shrugging off the risk of recession.
The preliminary “flash” reading of the S&P Global/CIPS UK Composite Purchasing Managers’ Index (PMI) jumped to 53.0 in February from 48.5 in January, above the 50 threshold for growth for the first time since July.
It beat all forecasts in a Reuters poll of more than 20 economists, which had shown a reading of 49.0.
The dominant services sector drove the improved reading, which financial data firm S&P Global put down to a recovery in global demand and stability since market turmoil linked to Liz Truss’s brief prime ministership.
More importantly for the Bank of England, as it weighs another interest rate hike, PMI price indices – a good guide to future inflationary pressure – continued to fall, with business costs rising at the fastest pace slow from April 2021.
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The survey suggested Britain’s economy may be in slightly better shape than many forecasters had predicted, although similar unexpectedly strong readings in the past have sometimes turned out to be uncomfortable.
“Much better than expected PMI data for February shows encouraging resilience in the economy,” said S&P Global chief business economist Chris Williamson.
“While many companies continue to report difficult operating conditions, particularly in the manufacturing sector, broader business sentiment has been buoyed by signs of peak inflation, improving supply chains and easing recession risks.”
Williamson added that the survey data increased the likelihood of a BoE rate hike next month, something most economists polled by Reuters already expect.
The PMI for the services sector rose to 53.3 in February from 48.7 in January, the highest reading since June last year.
Factory activity continued to contract, but at a much reduced pace, with the manufacturing PMI rising to 49.2 from 47.0, near 50, the unchanged point.
Both the services and manufacturing surveys showed that a growing number of companies became more optimistic about their prospects in February.
Reporting by Andy Bruce; Editing by Susan Fenton
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