Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
UK business activity rose more than expected in April, marking the fastest expansion since last May, according to a closely watched survey that also flagged increasing cost pressures in the economy.
The S&P Global flash UK composite output index rose to 54 in April from 52.8 in March, well above the 52.6 forecast by economists polled by Reuters, according to data released on Tuesday. A figure higher than 50 indicates expansion.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the UK’s economic recovery “continued to gain momentum” as improved growth in the services sector offset a renewed downturn in manufacturing.
He noted the data suggested the UK economy was growing by 0.4 per cent in the second quarter, following an estimated 0.3 per cent expansion in the first three months of the year.
However, the data also indicated a steep increase in average cost burdens, which had grown at their fastest pace since May 2023.
The PMIs pointed “to growth well in excess of Monetary Policy Committee forecasts and robust inflation pressure”, said Rob Wood, economist at the consultancy Pantheon Macroeconomics.
In February, the Bank of England forecast economic growth to remain stagnant at about 0.1 per cent in each quarter of 2024.
The survey respondents linked stronger input price inflation to higher staff wages, in part reflecting the nearly 10 per cent annual increase in the national living wage from April.
Prices charged by businesses rose at a slower pace than in the previous month but strong demand combined with rising costs could soon reverse that trend, according to the report.
“The upward pressure on inflation will add to concerns that a sustainable path to below target inflation has not yet been achieved,” said Williamson.
The rise in business activity was exclusively driven by the services sector, with the index increasing to an 11-month high of 54.9 in April, from 53.1 in the previous month.
Businesses reported rising consumer spending supported by an increase in real wages, easing inflation and low unemployment.
The UK composite figures were higher than 51.4 for the eurozone. Salomon Fiedler, economist at the bank Berenberg, said the figures suggested “the economic rebound started slightly earlier in the UK than on the continent”.
Source: Economy - ft.com
