By Suban Abdulla
LONDON, April 21 (Reuters) - British businesses reported
a bounce in activity this month and the slowest input cost
inflation in over two years, an industry survey showed on
Friday, but price pressures still look strong enough for the
Bank of England to raise rates again next month.
The preliminary or "flash" reading of the S&P Global/CIPS UK
Composite Purchasing Mangers' Index (PMI) - spanning services
and manufacturing firms - rose to 53.9 in April from 52.2 in
March, putting it further above the 50 line denoting growth for
the third consecutive month.
Friday's PMI figure signalled the strongest growth since
April last year. Economists polled by Reuters forecast a lower
reading of 52.5.
"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," Chris Williamson, chief
business economist at S&P Global, said.
The PMI was consistent with quarterly gross domestic product
growth of 0.4%, he added.
Last month the BoE revised up its forecasts to predict
modest growth for the second quarter of 2023, though it still
predicted a contraction in the first quarter of the year.
Britain's dominant services sector drove the improved PMI
survey, which S&P Global put down to resilient consumer spending
on travel, leisure and entertainment, as demand for business
services struggled.
The overall services PMI reached its highest in a year,
coming in at 54.9 in April, up from 52.9 in March.
By contrast, the manufacturing downturn deepened. Factory
production fell at the fastest pace since January and for the
second month in a row, dropping to 48.5 in April, and the
broader manufacturing activity index has been below 50 since
August.
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 March 2021, although overall cost pressures
remained high by historical standards.
Companies flagged higher staff wages and energy bills as the
most common reason for cost pressures.
Williamson said the combination of faster growth and
elevated price pressures means the BoE is likely to raise
interest rates to 4.5% next month.
The BoE increased interest rates to 4.25% last month from
4%, delivering its 11th back-to-back rate hike since December
2021 in an effort to combat double-digit inflation.
Britain's consumer price inflation reached 10.1% in March,
coming in stronger than expected as food and drink costs surged.
A GfK survey of British consumer confidence on Friday rose
to the highest since February 2022 in April, although it was
still weak in historical terms.
Companies across the manufacturing and services sectors were
more optimistic about their prospects over the next 12 months,
with the degree of confidence about future output hitting the
second-highest since March 2022.
(Reporting by Suban Abdulla; Editing by Hugh Lawson)
