By David Milliken
LONDON (Reuters) – British services businesses started 2024 on a robust footing, with a solid inflow of new orders and the fastest hiring in six months, as the prospect of lower interest rates made customers more willing to spend, a survey showed on Monday.
The S&P Global services PMI for Britain rose to 54.3 in January from 53.4 in December, its highest reading since May 2023 and stronger than an initial estimate of 53.8.
“New orders have also rebounded this winter as receding recession risks and looser financial conditions led to greater willingness-to-spend among clients,” Tim Moore, economics director at S&P Global Market Intelligence, said.
The strong picture for services contrasted with weak manufacturing numbers released on Thursday, when factories reported delays to deliveries from east Asia due to attacks on shipping in the Red Sea.
The composite PMI, which combines the two surveys, rose to an eight-month high of 52.9 in January from 52.1 in December, reflecting the greater weight of the larger services sector.
Last week the Bank of England forecast Britain’s economy would slowly pick up over the course of 2024, after stagnating in the second half of last year, reflecting falling inflation and market expectations that it would cut interest rates.
However, the BoE’s chief economist, Huw Pill, said a cut in rates from their current 5.25% was still likely to be some way off, as the central bank remained concerned about rapid rises in wages and the cost of labour-intensive services.
Monday’s PMI survey showed salaries remained a big driver of rising costs – acting as a partial brake on hiring – but overall costs were rising at the joint-slowest rate in three years.
Prices charged to customers increased by the least in four months, although still by a lot in absolute terms.
“Softer cost inflation reflected lower energy and fuel costs, alongside falling raw material prices,” Moore said.
(Reporting by David Milliken; Editing by Toby Chopra)
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