UK Composite PMI Leaps Above 50 Amid Sluggish Growth

The UK's S&P Global Composite PMI Final reading for July came in at 52.2, beating expectations of 52.1 and a previous reading of 49.3. This marks a significant improvement from below 50 to above it in just one month.

While this jump has historically indicated the turn from contraction to expansion, the survey's own caveat notes that growth remains sluggish compared to historic norms. This suggests that extrapolating a strong rebound may not be justified.

The key driver of sterling's reaction is the rate differential. An above-50 composite alongside slowing input price growth allows the Bank of England to maintain an easing bias without being pressured, as activity no longer demands rescue and disinflation continues.

However, there is a distinction to be drawn between the services-led input cost cooling flagged in this report and the still-elevated cost pressures services firms report. This tension has been cited by Bank of England hawks in resisting faster interest rate cuts.