UK Economy Gains Momentum, But Inflation Worries Linger

The UK economy has shown signs of recovery in August, driven by growth in the services sector. The services Purchasing Managers' Index (PMI) rose to 52.5, its highest level since April, while the composite PMI reached 52.5.

Business and consumer spending strengthened after a decline during the second quarter, supporting the improvement in operating conditions. Tim Moore, Economics Director at S&P Global Market Intelligence, noted that August data showed further gains in spending and improving conditions across the services economy.

The services sector remained the main driver of the improvement, with new work orders easing only slightly to 50.7 from 50.8 in July. Employment continued to fall, but the decline was the slowest since October last year.

However, the report also highlighted rising cost pressures, with more companies reporting increases in prices charged to customers and higher input costs. The acceleration in cost burdens was driven largely by stronger price pressures in services, with firms reporting higher fuel and transport costs alongside increases in wages, food, technology, and utilities.