UK Private Sector Growth Gains Momentum On Services Activity

The UK private sector activity posted its strongest growth in six months in December, thanks to a faster recovery in the service economy, flash survey results from S&P Global showed on Friday.

The Chartered Institute of Procurement & Supply flash composite output index rose more-than-expected to 51.7 in December from 50.7 in November. The score was seen at 50.9.

Although the score suggested the fastest rise in activity since June, the reading remained weaker than the long-run survey average.

“The UK economy continues to dodge recession, with growth picking up some momentum at the end of the year to suggest that GDP stagnated over the fourth quarter as a whole,” S&P Global Market Intelligence Chief Business Economist Chris Williamson said.

“…the fear is that the tentative nature of growth in December, and the impetus from looser financial conditions, means that fears of further policy tightening could tip the economy back into decline,” Williamson added.

The moderate upturn was underpinned by services activity, while the manufacturing sector remained in the contraction territory, the PMI survey showed.

The services Purchasing Managers’ Index rose to a six-month high of 52.7 in December from 50.9 in November. The reading was also above economists’ forecast of 51.0.

Meanwhile, the manufacturing PMI unexpectedly dropped to 46.4 from 47.2 a month ago. Economists had forecast a level of 47.5.

UK private sector firms revealed an increase in total new work for the first time since June. However, the improvement in order books was confined to the service economy.

Staffing numbers decreased for the fourth successive month as persistent economic uncertainty, strong wage pressures and fewer capacity constraints led to a marginal rate of job shedding.

On the price front, the survey showed that input cost inflation climbed to its highest since August, driven by sharp rise in operating expenses at service sector companies.

Greater input costs led to another robust increase in output charges, with little sign of a slowdown in inflationary pressures since the summer months.

Companies were optimistic about their own growth prospects. The degree of positive sentiment edged up to its highest since September.

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