The UK's private sector has demonstrated robust growth in January, accelerating at its most rapid pace since April 2024, according to the latest flash purchasing managers' index data. This positive momentum is primarily attributed to a significant upturn in the services industry, which has reached its highest level of expansion in 21 months.
Strong PMI Reading Exceeds Expectations
The closely monitored S&P Global flash UK composite purchasing managers' index (PMI) reported a reading of 53.9 for January, marking a notable increase from December's figure of 51.4. This preliminary data, based on early survey responses, indicates a substantial strengthening of business activity across the country.
Any PMI score above the critical 50.0 threshold signifies that economic activity is expanding, while a reading below this level suggests contraction. The January figure of 53.9 significantly surpassed economists' predictions, who had anticipated a more modest rise to approximately 51.5 for the month.
Services Sector Leads the Charge
Growth within the UK's services industry reached a 21-month high in January, with numerous surveyed firms reporting benefits from increased post-budget clarity. This improved certainty has enabled businesses to initiate new projects and facilitate investment flows, contributing to the sector's strong performance.
Chris Williamson, chief business economist at S&P Global Market Intelligence, commented: "UK businesses kicked up a gear in January, showing encouraging resilience in the face of recent geopolitical tensions. Companies are reporting higher demand, both from home and export markets, which has driven output growth to the fastest since April 2024."
Manufacturing and Export Improvements
The manufacturing sector also showed positive signs during January, with output reaching its strongest level since October. Several goods-producing firms reported improving export sales, indicating a broader recovery in international trade conditions.
Total new orders increased for the third time in the past four months, pointing toward a sustained improvement in economic activity across multiple sectors. This consistent demand growth suggests underlying strength in the UK's economic fundamentals.
Employment and Economic Outlook
Despite the overall positive business activity figures, firms remained cautious regarding employment, with job numbers declining compared to the previous month. This employment hesitancy contrasts with the otherwise optimistic business outlook, which has reached its highest level since before the autumn 2024 budget.
Thomas Pugh, chief economist at RSM UK, noted: "The sharp rise in the flash composite PMI suggests a decent post-budget bounce in activity is occurring as uncertainty dissipates. Signs of a rebound in growth in Q1, a now familiar pattern in the UK economy, are another reason to suspect that the MPC will wait until April before cutting interest rates again."
The data indicates that UK businesses are demonstrating remarkable resilience amid ongoing global challenges, with improved domestic and international demand driving the strongest expansion in nearly two years. This performance suggests the economy may be entering a more sustained period of growth as confidence returns following budgetary clarity.
