The upswing in UK business activity gathered momentum this August, with stronger economic growth, improved job creation, and a notable easing of inflationary pressures. According to the latest “flash” survey by S&P Global, the UK economy is showing steady growth as it heads into the second half of 2024.
The UK S&P Global Composite Purchasing Managers’ Index (PMI) rose to 53.4 in August, an increase from 52.8 in July, marking the highest level since April. This figure exceeded the expectations of economists, who had predicted a reading of 52.9. Any reading above 50 indicates growth, and these results suggest that the UK economy is expanding at a quarterly rate of 0.3%.
Steady Growth Despite Slower Pace
Although the current rate of expansion is slower than in the first half of the year, when the economy bounced back from a brief recession, it remains stronger than the average growth seen over the past two years. The sustained upswing in UK business activity highlights the resilience of the British economy, which continues to navigate challenges posed by global economic conditions.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented: “August is witnessing a welcome combination of stronger economic growth, improved job creation, and lower inflation, according to provisional PMI survey data.”
Easing Cost Pressures
One of the key takeaways from the report is the weakening of cost pressures on businesses. The rate at which costs increased in August was the slowest since January 2021. Additionally, the index measuring businesses’ price increases also saw a decline, indicating a gradual easing of inflationary pressures that had been a concern in the earlier part of the year.
Williamson added that this easing of cost pressures could potentially lead to a reduction in interest rates, though the still-high inflation within the services sector suggests policymakers will proceed cautiously.
A Reuters poll published earlier this week indicated that the Bank of England is expected to cut interest rates once more in November, taking into account the still-elevated nature of inflation within the broader economy.
Growth In Key Sectors
The services sector, which plays a crucial role in the UK economy, showed particularly strong growth in August. The PMI for the services sector rose to 53.3, up from 52.5 in July and surpassing the predicted 52.8. This marks the highest level since April, further highlighting the sector’s resilience.
The manufacturing sector also saw growth, with the manufacturing PMI rising to 52.5 in August, compared to 52.1 in July. This is the highest reading for manufacturing since June 2022. Notably, the sector added jobs at the fastest pace in over two years, contributing to the overall upswing in UK business activity.
As the country moves into the latter half of 2024, the combination of steady growth, improved employment rates, and easing inflation provides a positive outlook for businesses and the broader economy.
