Data released by S&P Global/CIPS showed that activity in the UK private sector increased slightly in February, but was below economists' forecasts and preliminary estimates. Moreover, the latest reading signaled a solid upturn in private sector output that was the fastest since May 2023.
The UK composite PMI rose to 53.0 points from 52.9 points in January. Economists had expected growth to 53.3 points. Meanwhile, the services PMI fell to 53.8 points from 54.3 points in January. The index was expected to remain unchanged. Both indices are above the 50-point mark, which indicates an expansion of activity in the sector, for the fourth month in a row.
"Another solid expansion of business activity across the service sector in February adds to signs that the UK economy has turned a corner after entering a technical recession during the second half of 2023," said Tim Moore, Economics Director at S&P Global Market Intelligence.
The report showed that new orders in the service sector grew at the strongest pace since May 2023. Service providers commented on rising business and consumer spending, linked to more supportive economic conditions. Meanwhile, new export orders also rose significantly in February (the strongest pace since June 2023), helped by higher demand from the United States and Asia, as well as a preliminary increase in European export orders. The data also pointed to a modest increase in employment in the service sector against the background of long-term business expansion plans and the need to increase production capacity. Meanwhile, business activity expectations for the coming year have further strengthened compared to the October low. About 59% of respondents predict an increase in business activity over the next 12 months, while only 9% predict a decrease. This signals the highest business optimism since February 2022. Respondents noted an improvement in business conditions this year, as well as hopes for lower interest rates and the positive impact of planned investment spending. However, service companies have noted problems arising from increased economic and political uncertainty around the world.