U.S. Business Activity Accelerated in January

Business is picking up–at least in the United States and the United Kingdom.

A survey of U.S. companies showed the growth of business activity accelerated in the new year, data company IHS Markit said Friday.

The IHS Markit composite purchasing managers index for the U.S. rose to a 10-month high of 53.1 in January, up from 52.7 in December. The composite index is based on data from IHS Markit’s surveys of both services and manufacturing businesses.

“The recovery of growth momentum across the U.S. private sector continued to quicken at the start of 2020, with overall output rising at the sharpest pace since last March,” said IHS Markit economist Sian Jones.

IHS Markit said the acceleration “was driven by a sharper increase in service sector output, as growth of manufacturing production was unchanged.”

The manufacturing sector continued to grow but the data indicate “a manufacturing sector that is not out of the woods yet, with goods producers seeing only modest gains in output and new orders,” Jones said.

Hiring also accelerated in January, reflecting improved optimism about future output and demand. Business confidence rose for the second consecutive month.

The survey showed that “output expectations across the private sector improved at the start of 2020, with optimism reaching a seven-month high in January.”

Europe, however, continues to flounder, especially outside of France and Germany. The IHS Markit survey for January indicated that “the eurozone economy failed to pick up growth momentum at the start of 2020.” Germany saw a “modest” uptick, IHS Markit said, while France’s growth weakened.

“While the year may have changed, the performance of the eurozone economy was a familiar one in January. Output growth was unchanged from the modest pace seen in December, signaling that the economy failed again to record a pick-up in growth momentum,” IHS Markit economist Andrew Harker said.

The story is quite different in United Kingdom on the eve of finally completing its exit from the European Union.

“Business activity expanded for the first time in five months, driven by the sharpest increase in new work since September 2018,” IHS Markit said. “There were widespread reports that reduced political uncertainty following the general election had a positive impact on business and consumer spending decisions at the start of the year.”