There was good news and bad news for the Bank of England as a survey showed business activity in the UK hit an eight-month high.
Figures from S&P Global showed the headline seasonally adjusted Flash UK PMI composite output Index registered 52.5 in January, up from 52.1 in December, the strongest rate of output growth since June 2023.
The index has picked up in each month since hitting an eight-month low last September of 48.5.
Chris Williamson, chief business Economist at S&P Global Market Intelligence said: “The survey data point to the economy growing at a quarterly rate of 0.2% after a flat fourth quarter, therefore skirting recession and showing signs of renewed momentum.”
But the survey also highlighted how the disruption from the Red Sea was impacting business.
Manufacturing supply chains were impacted by longer wait times for container freight during January in the wake of the conflict, while rising ocean freight rates contributed to a solid increase in costs.
ING’s James Smith notes that unlike the eurozone, the UK's service sector is picking up steam.
But “the issue for the Bank of England is that inflation is also proving sticky, and the PMI highlights the disruption in the Red Sea.”
He thinks today's data adds to the case for the Bank of England to wait a little longer before cutting rates.
“We expect a cut in August,” he said.