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Growth in UK business activity rose in January, but job cuts continued as cost inflation accelerated, according to a closely watched survey indicating a “stagflationary environment.”
The S&P World Composite PMI in the UK, which tracks activity in the private sector, rose to a three-month high of 50.9 points in January from 50.4 in December.
Economists polled by Reuters had expected the index to drop slightly to 50 points. Any reading above the 50 mark indicates that most companies are reporting growth in activity.
Despite the rise in the composite index, employment levels fell for the fourth straight month according to the survey, with companies often linking this to rising cost pressures. Standard & Poor's Global said that, excluding the pandemic period, the rate of job losses indicated by the PMI over the past two months was the highest since the global financial crisis in 2009.
Chris Williamson, an economist at S&P Global Market Intelligence, said the survey results “add to the gloom about the UK economy, with companies cutting staff amid falling sales and concerns about business prospects”.
He warned that inflationary pressures “have reignited, indicating a stagflationary environment that poses a growing policy dilemma for the Bank of England.”
