UK Economy Finds Firm Footing Amid Services Sector Growth
The UK economy showed signs of improvement in August, driven by growth in the services sector. The S&P Global flash UK PMI composite output index rose to 52.5 from 52.2 in July, exceeding the 50 mark that separates contraction from expansion for the second consecutive month.
The services PMI business activity index increased to a six-month high of 52.8 in August from 52.1 the previous month. In contrast, the flash UK manufacturing output index decreased to a five-month low of 51.2 this month from 52.9 in July.
Chris Williamson, chief business economist at S&P Global Market Intelligence, attributed the expansion to sunny weather and tech investment, but noted that growth in the manufacturing sector has softened due to precautionary stock building. This reflects easing concerns over the economic impact of the war in the Middle East, with businesses feeling more upbeat than at any time since the conflict began.
However, cost pressures remain high, primarily due to energy prices and supply disruption linked to the Middle East conflict alongside high staffing costs. Williamson stated that this 'clearly' indicates the Bank of England will maintain a hawkish bias but may hold off interest rate hikes until growth and inflation trajectories become clearer.