- Composite PMI 48.5 vs 47.8 prelim
The higher revisions in the final report doesn’t take away from the fact that overall activity is on the decline from December as economic risks stay heightened in the UK. Of note, the services sector has been in contraction for the fourth straight month now and overall demand conditions remain rather subdued. S&P Global notes that:
“January data pointed to the weakest service sector
performance for two years as cutbacks to business and
consumer spending resulted in a fourth consecutively
monthly reduction in output levels. The latest survey
illustrates that the UK economy risks falling into recession
as labour shortages, industrial disputes and higher interest
rates take their toll on activity.
“However, the downturn in service sector output remained
relatively shallow at the start of 2023. Encouragingly, new
order volumes moved closer to stabilisation and export
sales picked up in January, which contributed to a marginal
upturn in overall employment numbers.
“Intense pressure on costs from rising energy bills and
tight labour market conditions led to another sharp rise
in business expenses. Cost pressures are still higher than
at any time in the two decades prior to the pandemic, but
the overall rate of inflation eased to its lowest since August
2021 as reduced fuel prices offered some relief.
“Hopes of a sustained drop in input cost inflation , alongside
more favourable energy market trends and fewer concerns
about the global economic outlook, helped to boost
business activity expectations for the year ahead to the
strongest reported since April 2022.”
