According to the flash report from IHS Markit, business activity in the private sector improved in January, helped by increased activity in the manufacturing sector. However, the price pressure remained elevated.
The composite PMI index rose in January to 54.3 from 49.9 in December (an 18-month low). Meanwhile, the manufacturing index increased to 60.5 from 57.4 in December, and reached the highest level in 5 months. Economists had expected a decline to 57.0. Activity in the services sector also expanded in January - the PMI index rose to 52.2 from 48.7 in December. Economists had expected a drop to 48.0.
The new orders component recorded the strongest growth since September 2021, which was mainly helped by an increase in the manufacturing sector. The component of backlogs of work also increased, and showed the maximum rate of increase in 3 months. As for the labor market, employment growth in the private sector accelerated, while the rate of job creation remained above the historical average.
The data also signaled improved expectations for future performance. The increase was due solely to the manufacturing sector, where growth forecasts for the coming year were the most positive since June last year. Meanwhile, expectations in the services sector declined slightly from the December four-month high.
IHS Markit reported that inflation rates remained high in January - both sectors saw faster growth in charges, while commodity prices continued to rise particularly sharply.