The latest survey from S&P Global/CIPS showed that business activity in the private sector rose to a 3-month high in January, which was largely due to sustained modest growth in the service economy, which offset lower manufacturing production. However, total new work fell at the fastest pace since October 2023.
The UK composite PMI rose to 50.9 points in January from 50.4 points in December. Consensus estimates suggested a drop to 50.0 points. An index value above 50 points indicates an expansion of activity in the sector. But the latest reading remained lower than the long-run series average (53.6). The services PMI rose to 51.2 points from 51.1 points in December, while the manufacturing PMI increased to 48.2 points from 47.0 points. Economists had expected the services PMI to decline to 50.9 points and the manufacturing PMI to remain at 47.0 points.
Data also pointed to another drop in incoming new business in the private sector. Although only marginal, the rate of decline was the fastest since October 2023. Survey respondents noted that unfavourable domestic economic conditions and rising inflationary pressures had weighed on demand at the start of 2025. Staffing numbers continued to fall across the private sector, which extended the downward trend that began in October 2024. Lower employment was typically attributed to hiring freezes and the non-replacement of voluntary leavers in the wake of rising payroll costs. Meanwhile, the rate of inflation was the steepest for just over one-and-a-half years. Survey respondents often commented on higher salary payments, energy costs and prices paid for imported raw materials. Efforts to pass on higher business expenses resulted in a robust increase in average prices charged, with the rate of inflation the fastest since July 2023. Meanwhile, business activity expectations weakened for the sixth consecutive month in January and reached their lowest level since December 2022.