A leap in business costs by the second-fastest rate on record this month failed to dampen a “resurgent economy”, according to a closely-watched indicator of activity.
The flash IHS Markit/CIPS composite Purchasing Managers’ Index (PMI) found private sector output picked up at the fastest pace since June last year during February.
The report said spending on travel, leisure and entertainment was the driving force, thanks to an easing in the Omicron wave of coronavirus cases that damaged growth at the end of 2021.
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Chancellor wants to ‘focus’ on GDP
Manufacturing activity was flat on January’s level but still in growth, the survey showed, despite higher wages, energy bills and raw material costs.
They contributed to the fastest rise in operating expenses since November’s record.
But the report said: “Private-sector companies reported another steep increase in incoming new work in February.
“Stronger client demand was widely linked to improving confidence about the UK economic outlook and roll back of pandemic restrictions.”
The economy had just returned to its pre-pandemic size before it was hit by the Omicron variant in December.
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Inflation rises to near 30-year high
The Bank of England said earlier this month – following its second interest rate hike in as many meetings – that it sees a record slump in living standards ahead as the squeeze from inflation tightens.
The headline measure is tipped, by the Bank, to rise from its current level of 5.5% to above 7% in April when the energy price cap is adjusted to account for soaring wholesale gas costs.
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The average household will see their annual dual fuel bill rise by around £700.
Chris Williamson, the chief business economist at IHS Markit, said: “The latest PMI surveys indicate a resurgent economy in February, as business activity leapt as COVID-19 containment measures were relaxed.
“With the PMI’s gauge of output growth accelerating markedly in February and cost pressures intensifying to the second-highest on record, the odds of an increasingly aggressive policy tightening have shortened, with a third back-to-back rate rise looking increasingly inevitable in March.”