TOP NEWS: UK private sector hits high in April but growth ‘lopsided’

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The UK private sector in April saw the fastest rate of expansion in 12 months, survey results from S&P Global showed on Friday, but growth was primarily driven by the service sector.

The headline seasonally adjusted S&P Global flash UK composite output index read 53.9 points in April, up from 52.2 in March.

Rising further above the 50-point mark that separates contraction from expansion, it shows growth in private sector strengthened in April for the third consecutive month.

S&P Global noted the reading was the strongest rate of output growth since April last year. It was also better than the 52.5-point print expected by markets, according to FXStreet.

However, there were divergent trends by sector as strong growth in the service economy contrasted with another fall in manufacturing production.

The UK flash services purchasing managers’ index stood at 54.9 points in April, up from 52.9 in March, while the flash manufacturing PMI slipped further into contraction at 46.6 points, down from 47.9 in March.

S&P Global said new order growth hit a 13-month high in the service sector amid rising spending on travel, leisure and entertainment. Meanwhile, manufacturers attributed a renewed fall in new work to customer destocking, elevated energy costs, and subdued demand for big ticket consumer goods.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said April’s growth was ‘lopsided’.

‘Even within the service sector, growth is dependent on consumers switching spending from goods to services and a revival of financial services activity, both of which are areas susceptible to the impact of higher interest rates and the ongoing cost of living squeeze. Business services and manufacturing are clearly struggling,’ he said.

‘However, for now the key takeaway is that the economy as a whole is not only showing encouraging resilience but has gained growth momentum heading into the second quarter, the latest PMI reading broadly indicative of [gross domestic production] rising at a robust quarterly rate of 0.4%.’

Williamson noted that inflationary pressures have continued to cool in manufacturing, but said price pressures have picked up in services following the resurgence of demand.

‘This combination of faster growth and elevated price pressures put a twelfth rate hike by the Bank of England an increasingly done deal when it next meets on May 11, and will add to speculation that further hikes may be needed,’ he concluded.

The S&P Global flash UK composite PMI is complied by S&P Global from responses to questionnaires sent to survey panels of around 650 manufacturers and 650 services providers. Flash data is calculated from around 80% to 90% of total responses. The data is collected between April 12 and 19.

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