British companies reported an unexpected increase in output in November and evidence of stronger inflation, signs of strength in the economy that may concern the Bank of England.

S&P Global said its purchasing managers’ index edged up to 50.1, the highest reading in four months and above the threshold level of 50 dividing growth and contraction. It was up from 48.7 in October, a figure economists had expected would be repeated.

The data indicate resilience in the economy that may ward off the risk of a recession in the coming months. It also may focus attention at the central bank on the risk that the strength of demand will feed a wage-price spiral, something policy makers have worked for two years to choke off.

S&P’s report released Thursday found “renewed signs of sticky inflation in November.” Cost pressures rose for the first time in four months. This was “overwhelmingly linked to higher staff costs,” the research group said.

The central bank has been particularly focused on lingering services inflation in its battle to get the cost-of-living crisis under control, since price rises in this sector are likely to be driven by domestic factors such as wage-setting rather than external factors such as energy prices and supply-chain issues.

“The UK economy found its feet again,” said Tim Moore, economics director at S&P Global Market Intelligence. “Overall input cost pressures picked up for the first time in four months. Service sector inflation was a key area of concern as businesses once again reported the need to pass on higher staff costs to customers.”

Inflation fell to 4.6% in October, allowing Prime Minister Rishi Sunak to claim victory on his goal of halving inflation over 2023. That has spurred investors to bet that the BOE will start cutting rates next year, something BOE Governor Andrew Bailey has said he’s not yet considering.

Britain’s Office for Budget Responsibility yesterday said it expected inflation to linger longer than it did in March and that measures set out by Chancellor of the Exchequer Jeremy Hunt will boost demand more than the supply capacity of the economy. Together, those factors may support the BOE’s case that interest rates will need to remain elevated for some time.

Economists think getting inflation down to the target of 2% will be the hardest part of the battle. BOE officials told Parliament earlier this week that they’re still worried about a resurgence in inflation. Catherine Mann, who sits on the nine-member Monetary Policy Committee, said she was worried that expectations for future price rises could spin out of control again without further rate hikes.

While the services index recorded a reading of 50.5, manufacturing activity was still contracting at 46.7, a six-month high.

Manufacturers put this down to reduced consumer spending, as household budgets remain constrained by higher debt costs and price rises in shops. Export sales also decreased.

“The survey’s forward-looking indicators suggested that recession risks will likely remain elevated into the New Year, as new orders decreased for the fifth month running amid ongoing reports of subdued sales opportunities,” Moore said.