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LONDON: Activity in Britain’s private sector picked up at the fastest pace since June 2021 this month, as spending on travel, leisure and entertainment rose after an easing in the Omicron wave of coronavirus cases, a survey showed on Monday.
However, businesses’ costs rose at the second-fastest rate since the IHS Markit/ CIPS composite Purchasing Managers’ Index (PMI) began in 1998, which will add to the Bank of England’s (BoE) concerns about the persistence of soaring inflation.
The composite PMI’s headline output index rose to 60.2 in February from 54.2 in January, its highest in eight months and above all forecasts in a Reuters poll of economists.
The index sank to a 10-month low of 53.6 in December when Britons were advised to work from home due to Omicron and many chose to cut back on socializing in the run-up to Christmas.
February’s rise was driven by an increase in the flash services PMI to 60.8 from 54.1 in January, while the manufacturing PMI was unchanged at 57.3.
“Private-sector companies reported another steep increase in incoming new work in February,” IHS Markit said. “Stronger client demand was widely linked to improving confidence about the UK economic outlook and rollback of pandemic restrictions.”
Britain’s economy had just returned to its pre-pandemic size before it was hit by the Omicron variant in December.
The BoE expects the economy to recover its size by the end of 2019 by March.
But it sees headwinds to further growth from a squeeze on household living standards as inflation is on course to hit a 30-year high of more than 7% in April when regulated energy prices rise. Monday’s PMI showed the composite input cost index rose to 81.8 from 80.2 – the second-highest reading on record after November’s 83.2. Higher wages, energy bills, and raw material costs all contributed to rising operating expenses.
Source: GWFM Research
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