Firms across the two sectors were more optimistic about their prospects over the next 12 months, with the degree of confidence hitting its highest since March 2022.
"With the flash PMI surveys signalling a second month of rising output in March, the UK economy looks to have returned to growth in the first quarter," S&P Global's Chief Business Economist, Chris Williamson, said. "An upturn in companies' expectations for the year ahead indicates that business sentiment has been little affected so far by the banking sector woes and that firms are more focused on growth possibilities."
While the rate of growth in the services industry eased this month compared to February, new business activity rose at the sharpest pace in 12 months. Manufacturing output fell marginally as subdued demand depressed volumes.
Friday's survey added to a series of improved measures of
the UK economy which had appeared to be heading for a recession
in early 2023, although on Thursday the Bank of England said it
still expected it to shrink in the January-March period before
picking up in the second quarter.
Official data, published earlier in March, showed the economy unexpectedly returned to growth in January and the country's official fiscal forecasters last week said Britain would probably dodge a recession this year. S&P Global's input price index - a good guide of future inflation pressures - showed growth in costs for firms falling to the lowest since April 2021, although overall cost pressures remained high by historical standards.
Service firms flagged a steeper rise in input prices than manufacturing companies, with the latter recording the slowest increase since June 2020.
Companies said lower fuel bills and transport costs, partly
offset wage pressures and higher food prices.
The Bank of England on Thursday increased interest rates to
4.25% from 4% after a surprise surge in consumer price inflation
which hit 10.4% in February. But some economists said the hike
might be the last in a run of rate hikes going back to December
2021.
(Reporting by Suban Abdulla
Editing by William Schomberg and Susan Fenton)
