UK private sector returns to growth

UK private sector output stabilised in November, a closely-watched survey showed on Thursday, driven by growth in services.

The flash S&P Global/CIPS UK PMI composite output index nudged into growth, at 50.1, from October’s 48.7. It was the first time it rose above the neutral 50.0 level since July, and was ahead of forecasts for no change.

A reading above 50 indicates growth, while one below suggests contraction.

Within that, the UK services PMI Business Activity Index rose to 50.5 from 49.5, a four-month high and also ahead of consensus for no change.

Manufacturing remained in contraction, but posted an improved performance. The UK manufacturing output index rose to 47.9 from 44.3 a month previously, while the PMI increased from 44.8 to 46.7 - a six-month high.

However, total new order intakes decreased for the fifth month running, which S&P Global said suggested that "subdued"” underlying demand conditions were persisting.

The survey also pointed to "sticky" inflation, with both input costs and average prices charged increasing at faster rates than in October.

Tim Moore, economics director at S&P Global Market Intelligence, said: "The UK economy found its feet in November, as the service sector arrested a three-month sequence of decline and manufacturers began to report less severe cutbacks to production schedules.

"Relief at the pause in interest rate hikes and a clear slowdown in headline measures of inflation are helping to support business activity."

John Glen, chief economist at the Chartered Institute of Procurement & Supply, said: "Challenges persist for UK manufacturing, with subdued demand leading to decreasing production.

"The UK is not alone is continuing to face a challenging economic environment, and the fall in export sales for both manufacturing and services shows that UK businesses cannot rely on international sources to help replace diminished domestic demand.

"The sticky nature of inflation will be a cause of concern for businesses."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The recovery in the composite PMI to above 50 provides reassurance that the economy is not on the brink of a recession.

"We expect quarter-on-quarter in GDP in the fourth quarter to be boosted by a recovery in output in the public sector – which is not covered by the PMI – due to a decline in the disruption caused by strikes. For now then we are standing by our above-consensus forecast for fourth-quarter GDP."

Martin Beck, chief economic advisor to the EY Item Club, said: "The survey pointed to a slight uptick in inflationary pressures. Input cost inflation rose in November, but remained softer than in the third quarter. Output price inflation also increased on the back of stronger pay growth, particularly in the services sector.

"This is likely to reinforce the Bank of England’s view that interest rates will have to remain at current restrictive levels for some time, although we continue to think that inflation will fall faster, and rates will be cut earlier, that the consensus currently expects."

Survey data were collected between 9 and 21 November.