The UK private sector expanded sharply in February due to the swift rebound in economic conditions after disruptions caused by the Omicron variant at the turn of the year, flash survey results from IHS Markit showed on Monday.
The Chartered Institute of Procurement & Supply composite output index rose to an eight-month high of 60.2 in February from 54.2 in January.
The score was forecast to rise moderately to 55.0. A reading above 50.0 indicates expansion in the private sector.
Output growth in the service economy exceeded that seen in the manufacturing sector by a wide margin.
The services Purchasing Managers’ Index advanced to 60.8 from 54.1 a month ago. The expected reading was 55.5. At the same time, the factory PMI held steady at 57.3 in February. The reading was seen at 57.2.
Private sector companies reported another steep increase in incoming new work in February. Staff recruitment accelerated again in February in response to increased workloads and favorable growth projections.
Business expectations picked up for the third month and were the most optimistic since May 2021.
Severe inflationary pressures persisted in February. The overall rate of input cost inflation was the steepest since last November and the second-highest since the index began in January 1998. This resulted in another sharp increase in average prices charged by private sector firms.
“The PMIs suggest the economy shrugged off the hit from Omicron,” Adam Hoyes, an economist at Capital Economics, said. “And tentative signs of easing supply disruptions provide some reassurance that the upward pressure on inflation from global factors may abate soon.”
But with CPI inflation far above the Bank of England’s 2 percent target and set to rise further, the Bank of England is expected to hike interest rates from 0.50 percent to 0.75 percent on March 17.
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