Data published by S&P Global / CIPS showed that in April, the growth of business activity in the private sector accelerated sharply, and reached the highest level in 12 months, which was facilitated by further steady growth in new orders. However, there were different trends by sector, as strong growth in the service sector contrasted with another drop in activity in the manufacturing sector.
The UK Composite Output Index rose to 53.9 points in April from 52.2 points in March. Economists had expected the index to rise only to 52.5 points. The index remains above 50 points, which indicates an expansion of activity, for the third month in a row.
The services PMI rose to 54.9 points (12-month high) from 52.9 points in March, while economists had expected the index to remain unchanged. Meanwhile, the manufacturing PMI fell to 46.6 points (4-month low) from 47.9 points in March. Consensus estimates suggested an increase to 48.5 points. The contrasting trends for business performance in April largely reflected divergent demand patterns. The growth of new orders reached a 13-month high in the service sector amid rising spending on travel, recreation and entertainment. Meanwhile, manufacturers recorded a reduction in new orders against the background of customer destocking, elevated energy costs and subdued demand for big ticket consumer goods. Similarly, export sales grew at a steady pace in the services sector, but manufacturers recorded the 15th consecutive monthly decline. The data also showed that improved supply conditions, lower transportation costs and lower commodity prices contributed to a slowdown in input cost inflation across the private sector economy in April. The latest growth was the weakest since March 2021, helped by much softer purchasing price inflation in the manufacturing sector. April data pointed to a slight acceleration in prices charged inflation since March, although the latest rise was still softer than the record high seen in April 2022. Meanwhile, the degree of confidence towards output growth in the year ahead eased slightly since March but was the second-highest since March 2022.