UK Private Sector Activity Growth Eases to 7-month Low – S&P
The UK’s business activity expansion further eased in June after a slowdown in the service sector offset a rise in manufacturing production, S&P Global said Friday.
UK private sector business activity expanded in June at its slowest rate since last November, as a slowing of service sector growth offset a stronger performance in manufacturing.
Output at goods producers rose to the greatest degree since April 2022, driven by improved order book intakes and strong business confidence.
At the same time, services activity grew at its softest pace for seven months, although survey evidence indicated that the slowdown was partly driven by a pause in client spending decisions during the election period.
According to PMI details, UK firms also faced a quickening of input cost inflation in June, as severe global shipping constraints led to higher transport costs.
The rise fed through to quicker increases in output charges among both manufacturing and services companies, with producers notably raising their prices at the sharpest rate since May 2023. The headline seasonally adjusted S&P Global Flash UK.
PMI Composite Output Index fell from 53.0 in May to 51.7 in June, signaling a slower and modest increase in business activity at the end of the second quarter of the year.
Furthermore, the expansion was the softest recorded since November 2023. Services firms experienced a loss of growth momentum for the second month running in June, with business activity rising only modestly and at the weakest pace for seven months.
Although higher customer demand helped to boost activity levels, according to respondents, this was partly offset by reports of spending decisions being put on hold due to the general election.
At the same time, manufacturers registered the sharpest rise in production levels for over two years, building on a renewed upturn in output in May amid sustained growth of new order volumes.
Some companies also highlighted efforts to increase capacity and catch up on backlogs in the expectation that demand will continue to improve and support output.
UK companies recorded a moderate uptick in new business in June, with the pace of growth unchanged and the joint-lowest in the current seven-month sequence of expansion.
Again, services and manufacturing firms were alike in registering only a modest upturn, although the latter’s increase was the strongest observed since April 2022.
A dip in foreign demand for manufactured goods meant that overall new export orders decreased fractionally in June, thereby ending a two-month period of marginal gains.
This came despite a further uplift in new export business at service providers. Employment across the UK private sector remained on an upward trajectory in June, having increased in every month of 2024 so far.
However, there was further evidence that hiring difficulties and efforts to save costs led to another subdued rate of job creation, with the rise in employment even softening from May to a fractional pace. Services and manufacturing continued to differ in their hiring trends, with a slight increase in jobs among service providers contrasting with a modest decline at goods producers.
Inflationary pressures were back on the rise during June, as companies widely reported a steep increase in transport costs linked to global shipping bottlenecks. Input price inflation accelerated from its 40-month low in May,
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Flash PMI survey data for June signal a slowing in the pace of economic growth, indicating that GDP is now growing at a sluggish quarterly rate of just over 0.1%.
“The slowdown in part reflects uncertainty around the business environment in the lead up to the general election, with many firms seeing a hiatus in decision making pending clarity on various policies.
“Meanwhile, from an inflation perspective, stubbornly persistent service sector inflation – a major barrier to lower interest rates – remains evident in the survey, but should at least cool further from the current 5.7% pace in coming months.
“However, companies’ costs are rising, most notably in manufacturing, where shipping costs in particular are spiking again and adding to a renewed rise in inflationary pressures from goods.
“In short, while a slowdown in economic growth may prove temporary, should businesses react positively to the policies announced by any new government, the stubbornness of underlying inflationary pressures above the Bank of England’s target still looks somewhat engrained.” #UK Private Sector Activity Growth Eases to 7-month Low – S&P
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