THE UK private-sector economy expanded in January for the first time in five months but manufacturing continued to contract, a key survey shows.

News of the return to growth pushed sterling higher initially, but the pound then fell back, with markets still pricing in a 50 per cent chance of a cut in UK base rates from 0.75% when the Bank of England Monetary Policy Committee meets next Thursday. Sterling was, at 5pm in London, trading around $1.3071, down by 0.33 cents on its Thursday close.

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The survey, published yesterday by the Chartered Institute of Procurement & Supply and IHS Markit, shows the flash composite output index for UK services and manufacturing has risen from 49.3 in December to 52.4 this month on a seasonally adjusted basis.

IHS Markit chief business economist Chris Williamson calculated that the flash composite output index in January was consistent with a quarterly growth rate of 0.2%. While way below the UK’s long-term trend rate of growth, this is nevertheless a brighter picture than that in the fourth quarter of last year.

The flash UK manufacturing output index has risen to 49.5 this month, from 45.6 in December, but remains adrift of the 50 no-change mark. The flash UK services business activity index has risen to 52.9, from 50 in December.

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Economists estimate the UK economy will turn out to have contracted or stagnated in the fourth quarter of 2019, with official data having shown a 0.3% month-on-month fall in gross domestic product in November. Brexit uncertainty has weighed heavily on the UK economy in recent times.

Bank of England Governor Mark Carney said earlier this month: “There are downside risks from global growth and the possibility that uncertainties over future trading relationships could remain entrenched. With the relatively limited space to cut Bank Rate, if evidence builds that the weakness in activity could persist, risk management considerations would favour a relatively prompt response.”