March 4, 2020 / 9:32 AM / 3 months ago

UK Feb PMI points to best growth since Sept 2018 but coronavirus looms

LONDON, March 4 (Reuters) - Britain’s economy grew at its fastest rate since September 2018 last month, though manufacturers and the services industry increasingly felt the impact of the spreading coronavirus as the month went on, a business survey showed on Wednesday.

The all-sector IHS Markit/CIPS UK Purchasing Managers’ Index rose to 53.0 in February from 52.8 in January, as a jump in construction activity outweighed small losses in momentum in the larger services and manufacturing sectors.

The services PMI slipped to 53.2 from a flash estimate of 53.3 and a 16-month high of 53.9 in January, which reflected a post-election bounce in business sentiment that risks being undermined by the coronavirus.

“Whether this expansion can be sustained in coming months is starting to look increasingly at risk,” IHS Markit economist Chris Williamson said.

“The survey data leave policymakers juggling between current signs of both improved economic growth and rising prices, while risks to the outlook have clearly intensified.”

Taken at face value, the PMIs suggested Britain’s economy is growing at a quarterly rate of just over 0.2%, faster than at the end of 2019, IHS Markit said.

But Bank of England Governor Mark Carney said on Tuesday - shortly before the U.S. Federal Reserve cut interest rates - that the economic impact of the virus could be large and policymakers were working on possible responses.

The PMI survey took place between Feb. 12 and Feb. 26, and towards the end of this period the impact of the coronavirus began to grow.

“There were a number of reports citing a negative impact on sales from the coronavirus outbreak, particularly to clients in overseas markets,” IHS Markit said. “The loss of momentum for incoming new business also contributed to the sharpest drop in backlogs of work since last September.”

Britain’s economy has shown signs of recovery since Prime Minister Boris Johnson’s emphatic election victory in December.

But a PMI survey of the manufacturing sector on Monday showed factories suffered a big jump in delays in their supply chains as a result of the coronavirus outbreak.

In the services sector, job creation was the weakest for three months, with some firms saying uncertainty about the global economy had made them more cautious about hiring.

However, business optimism across the sector hit its highest in nearly five years. Higher wages and other costs led to the fastest rise in average prices charged by service providers since November 2017.

- Detailed PMI data are only available under licence from IHS Markit and customers need to apply for a licence.

To subscribe to the full data, click on the link below: here

For further information, please phone IHS Markit on +800 6275 4800 or email economics@ihsmarkit.com (Reporting by William Schomberg and David Milliken; editing by John Stonestreet)

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