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U.K. flash IHS Markit manufacturing and services PMI indices rise sharply in January

The U.K. flash Manufacturing PMI index rose solidly in the month of January to 49.8 from December’s 47.5. This is the highest since April 2019 and just marginally below the neutral 50.0 threshold. Today’s print hinted at a wide stabilization of business conditions throughout the manufacturing sector at the beginning of 2020. Increased levels of new work and a slight rise in employment were positive contributions to the index, while a sharp and accelerated decline in stocks of purchases mainly contributed negatively.

Meanwhile, manufacturing production dropped at a much slower pace than in December, with the latest reduction only marginal and the smallest since the current phase of fall started in June 2019. Lower output was attributed to a lack of pressure on operating capacity and, in some cases, the ability to fulfil orders from inventories accumulated to deal with Brexit uncertainty.

On the other hand, the seasonally adjusted flash U.K. services PMI index rose sharply in the month to 52.9 from December’s 50. This is the highest reading since September 2018. Mirroring the trend for business activity, latest data also showed the sharpest rise in new work for 16 months.

According to the survey respondents, the receding political uncertainty stimulated service sector activity in January. Several service providers commented on the receipt of new business that had been delayed ahead of the general election. Sales to clients in overseas markets continued to be weak in January, continuing the downward trend observed in the fourth quarter of 2019. Service sector companies saw a recovery in business optimism to its highest since March 2015, which was attributed to rebounded expectations for both domestic demand and the global economic outlook.

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