UK composite PMI rises to nine-month high

22nd Feb 2024 09:50

(Sharecast News) - Private-sector activity in the UK picked up to a nine-month high in February as solid service-sector growth made up for continued weakness in manufacturing.

The S&P Global/CIPS composite purchasing managers' index (PMI), a leading indicator gauging economic activity across services and manufacturing combined, rose to 53.3 this month, surprising analysts who had pencilled in no change from January's level of 52.9.

This was the fourth consecutive month of growth across the private sector - indicated by any figure over 50 - and the strongest reading since May 2023.

S&P Global said that February's data highlighted a solid improvement in customer demand, with the biggest increase in new work for nine months. Meanwhile, hopes of a sustained domestic rebound in economic conditions resulted in the highest level of optimism about the near-term business outlook since February 2022.

The services PMI held steady at 54.3, ahead of the 54.1 consensus estimate, while the manufacturing PMI rose to a three-month high of 47.1 from 47.0, albeit missing the 47.5 expected by economists.

"UK economic growth has accelerated in February, with the early PMI survey data pointing to the largest rise in business activity for nine months," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "This is by no means a one-off improvement, as faster growth has now been recorded for four straight months after a brief spell of decline late last year."

Williamson added: "It's particularly encouraging to see that the upturn in growth has been accompanied by a surge in optimism about year-ahead prospects to the highest for two years, in turn encouraging a second month of increased employment."

Commenting on the data, EY ITEM Club said the stronger-than-expected figures reinforce its view that the UK economic contraction seen in the second half of last year "should prove short-lived".

"The activity surveys point to GDP returning to growth in the current quarter, albeit with the pace of expansion in Q1 held back by the effects of public sector strikes. Over the course of this year, the EY ITEM Club expects lower inflation to support real incomes and drive a recovery in activity," said Martin Beck, chief economic advisor to the EY ITEM Club.