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The UK private sector saw the sharpest drop in business activity in two years, the latest data on Tuesday showed.
The S&P Global CIPS UK flash composite purchasing managers’ index fell to a 24-month low of 47.8 points in January, from 49.0 in December. Falling further beneath the 50.0 no-change mark, it shows the contraction in the UK’s private sector has worsened at the start of 2023.
The deterioration was led by a fall in the services sector, with the flash services PMI falling to 48.0 in January from 49.9 in December. This was worse than FXStreet-cited consensus, which had expected the reading to remain the same as the previous month.
The rate of decline in the manufacturing sector eased somewhat, with the flash manufacturing PMI improving to a four-month high 46.7 from 45.3. The figure was better than consensus of 45.0.
‘Weaker than expected PMI numbers in January underscore the risk of the UK slipping into recession. Industrial disputes, staff shortages, export losses, the rising cost of living and higher interest rates all meant the rate of economic decline gathered pace again at the start of the year,’ said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Jobs were lost as some UK employers cut costs, even as other companies reported an ongoing lack of available labour.
‘There were some bright spots in the survey, including improved business expectations for the year ahead and a further cooling of inflationary pressures. The overall rate of decline indicated also remains only modest,’ Williamson added.
The UK flash composite PMI is compiled by S&P Global from 80% to 90% of responses to surveys sent to around 650 UK manufacturers and around 650 service providers. The data were collected between January 12 to 20.
By Elizabeth Winter, Alliance News senior markets reporter
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