UK firms report growth at 9-month high but price pressures mount, PMI survey shows

A bale of hay hangs from Millennium Bridge, in London

LONDON (Reuters) - British companies had their strongest month in February since May last year, suggesting the economy is out of a short recession, but inflation pressures will keep the Bank of England on alert, according to a survey published on Tuesday.

The S&P Global composite Purchasing Managers Index, spanning Britain' services and manufacturing sectors, edged up to 53.0 from 52.9 in January.

A final version of the PMI for the services sector on its own dipped to 53.8 from January's 54.3 and was a touch weaker than the preliminary February estimate which also stood at 54.3. But it was still its second-highest reading since May 2023.

"Another solid expansion of business activity across the service sector in February adds to signs that the UK economy has turned a corner after entering a technical recession during the second half of 2023," Tim Moore, Economics Director at S&P Global Market Intelligence, said.

Britain's economy shrank in the third and fourth quarters of 2023, meeting the technical definition of a recession. But falling energy prices and wages growing faster than inflation are expected to nudge it back into positive albeit weak growth.

British finance minister Jeremy Hunt is expected to announce measures to boost the economy - and Prime Minister Rishi Sunak's hopes of winning an election later this year - in a budget statement on Wednesday.

Tuesday's survey showed order books for services firms grew at the fastest pace since last May, boosted by optimism among clients about the prospect of the Bank of England cutting interest rates.

However, the central bank was likely to take note of the fastest rise in input prices in the composite survey since last August and the prices charged by companies gathered pace to rise at the joint-fastest rate since July last year.

BoE officials have said the time for a first rate cut since the pandemic is approaching but they also want to see evidence that the persistence of inflation pressures - in particular strong wage growth - is abating before they make their move.

(Writing by William Schomberg, editing by Andy Bruce and Christina Fincher)