Growth in the service sector growth underpinned the fastest rise in UK private sector output for one year in April, according to the S&P Global/CIPS Flash UK PMI.
At 53.9 in April, the headline seasonally adjusted figure was up from 52.2 in March and above the crucial 50.0 no change threshold for the third month running. The reading was above analysts’ consensus forecasts of 52.5.
Moreover, it signalled the strongest rate of output growth since April 2022.
#UK private sector firms signalled a further increase in business activity with the rate of expansion accelerating to its fastest in a year (#PMI at 53.9; Mar: 52.2). The rate of input cost inflation slowed, but output charges increased steeply. Read more: https://t.co/lByqsf9t6N pic.twitter.com/eU9raeLl9R
— S&P Global PMI™ (@SPGlobalPMI) April 21, 2023
Rising volumes of private sector business activity contrasted with a modest downturn throughout most of the second half of last year.
The latest survey indicated a robust and accelerated increase in service sector output (index at 54.9), with growth the highest for one year.
In contrast, manufacturing production (index at 48.5) decreased for the second month running and at the fastest pace since January.
The contrasting trends for business performance in April largely reflected divergent demand patterns. New order growth hit a 13-month high in the service economy amid rising spending on travel, leisure and entertainment.
Meanwhile, manufacturers attributed a renewed fall in new work to customer destocking, elevated energy costs and subdued demand for big ticket consumer goods.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Flash PMI surveys signalled an acceleration of economic growth to the fastest for a year in April, building on a modest return to growth in the first quarter of the year.
“Growth is lopsided, however, with surging demand for services contrasting with an ongoing downturn in demand for goods.”
The PMI readings in the UK and the eirozone has given a lift to the FTSE 100, now up 13 points.
The flash PMIs suggest the economy is still proving resilient to the dual drags of high inflation and high interest rates going into the seond quarter, according tp Capital Economics UK Economist, Ashley Webb.
Webb said that, and the uptick in the services output prices balance, "gives us greater confidence in our view that the Bank of England will need to raise interest rates from 4.25% to 4.50% in May."
The increase in the flash UK composite PMI from 52.2 in March to 53.9 in April (consensus forecast 52.5, CE forecast 52.0) provides further evidence that the recent concerns over the health of global banks still haven’t weighed on activity, Webb noted.
Like the flash composite PMI in the euro-zone, the UK composite flash PMI suggests the economy grew at the start of the second quarter suggesting "the risks to our forecast of a 0.2% q/q drop in Q2 lie to the upside."