UK private sector activity rises for the first time in five months

According to the report from IHS Markit/CIPS, January data pointed to a solid recovery in the performance of the UK service sector, with business activity, new work and employment all expanding at a faster pace than seen at the end of 2019. Survey respondents widely commented that improved business and consumer confidence had translated into rising client demand.

At 53.9 in January, up from 50.0 in December, the seasonally adjusted UK Services PMI Business Activity Index registered in expansion territory for the first time since last August. Economists had expected an increase to 52.9. The latest reading was the highest for 16 months and above the earlier 'flash' estimate of 52.9 in January, to signal a solid increase in service sector output. Survey respondents noted that the headwind from delayed decision-making had lifted since the general election and helped to deliver a return to business activity growth in January. This was also reflected in a robust improvement in order intakes, with the rate of new business expansion accelerating to its strongest since June 2018.

The UK Composite Output Index

At 53.3 in January, up from 49.3 in December, the seasonally adjusted UK Composite Output Index posted above the neutral 50.0 mark for the first time since last August. The latest reading signalled a faster pace of growth than the earlier 'flash' estimate (52.4 in January) and was the highest for 16 months. The solid increase in private sector output was driven by a return to growth in the service economy (index at 53.9) and supported by a broad stabilisation in manufacturing production at the start of 2020 (index at 50.1).