UK businesses reported the fastest growth in a year as spending on holidays and entertainment powered a stronger-than-expected pick-up in momentum.
(Bloomberg) — UK businesses reported the fastest growth in a year as spending on holidays and entertainment powered a stronger-than-expected pick-up in momentum.
The composite purchasing managers’ index jumped to 53.9 in April from 52.2 the previous month after an acceleration in the services sector, S&P Global said Friday. Economists had expected the reading to remain unchanged. It’s now been above the threshold of 50 signaling an expansion for three months.
The figures suggest the British economy is holding up against a barrage of headwinds, including higher interest rates and squeezed spending power. It will strengthen the case for the Bank of England to carry on raising interest rates to bring inflation under control.
“The economy as a whole is not only showing encouraging resilience but has gained growth momentum,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
What Bloomberg Economics Says …
“The UK’s composite PMI remained in expansionary territory for a third straight month in April, leaving little doubt that the underlying growth in the economy has strengthened — even if industrial action risks clouding the picture in the official GDP data. The reading supports the Bank of England’s recently upgraded near-term outlook.”
—Ana Andrade, Bloomberg Economics. Click for the REACT.
He said the advance means a 12th straight rate hike at the BOE’s next meeting on May 11 is “an increasingly done deal” and could suggest that further increases are required.
S&P said growth in the services sector hit a one-year high and drove a rise in overall job creation to a six-month high. New order growth in services jumped to a 13-month high, boosted by spending on travel, leisure and entertainment.
However, the manufacturing sector slipped deeper into contraction territory in April even as supply chains improved and factory cost pressures eased. The manufacturing PMI fell to 46.6, a four-month low.
“Inflationary pressures have meanwhile continued to cool in manufacturing, but price pressures have picked up in services following the resurgence of demand,” Williamson said.
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