8 Month high growth for services sector

The UK’s services sector saw growth at its fastest rate for 8 months in February in spite of record price increases. The PMI Survey from The IHS Markit/CIPS scored 60.5 in February, representing an increase of 6.4 points from January. For clarity, a reading above 50 represents growth. Looking at February’s figures in a little more detail, this was the highest rate since June 2021 with the sector rebounding significantly as the Omicron variant waned and the lockdown measures eased. Interestingly, approximately one third of businesses surveyed increased their selling prices during February against the backdrop of rising inflation rates. Service firms saw input price inflation increase at the second fastest pace since records began, with staff salaries rising alongside energy and fuel costs. Although the overall sector PMI measurement rose from 54.2 in January to 59.9 in February, there are growing and ongoing concerns that this growth will subside as the conflict in Ukraine and the increasing cost of living rates negatively impact confidence.

UK Business activity exceeds expectation in March

The S&P Global flash UK Purchasing manager composite index dropped to a 2 month low of 59.7 in March, down 2.2 points from 59.9 in February. This figure however was higher than the original 57.8 forecast recorded from a recent poll of economists by Reuters. Aided by the reduction of Covid 19 restrictions, growth in the services sector in particular was stronger than expected however this was offset by a reduction in output from the manufacturing sector which saw a drop to a 5 month low as pressure from rising inflation and supply shortages took hold.

Chris Williamson, S&P Global’s chief business economist, said the reopening of the British economy after Covid-19 restrictions had aided offset the drag from the conflict in Ukraine, Brexit and rising prices. However, he also warned of “potentially sharply slower growth in the coming months, accompanied by a further acceleration of inflation and a worsening cost of living crisis, which paints an unwelcome picture of ‘stagflation’ for the economy in the months ahead”.

Expectations for inflation hit record high

A survey conducted by YouGov and Citi has revealed expectations for inflation in 10 years time have reached a joint record high. Results showed that those surveyed believe cost of living will reach 4.1% in a decades time, an increase from 3.8% the month previously. With inflation at its highest rate in 30 years currently, reaching 5.5% in January, concerns continue to grow. The Bank of England meanwhile has stated the rate of price increases will peak at 7.25%, whilst other economy experts are predicting we could see inflation hit 8% in April.

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*Sources: Financial Times, Daily Express, Reuters, The Times, City AM, NACFB,