UK August flash output PMI hits 4-month high

The UK private sector continued to expand in August, with the S&P Global Flash UK PMI Composite Output Index rising to 53.4 from 52.8 in July, marking its highest level since April.

The increase reflects robust new order intakes, accelerated business activity, and the fastest rate of employment growth since June 2023.

The PMI data indicated strong performance in both manufacturing and services. Manufacturing production surged to an index of 54.2, only slightly below July’s near two-and-a-half-year high, while service sector activity grew at its fastest pace in four months, reaching an index of 53.3.

“August PMI data signalled another solid expansion of UK private sector output, supported by a robust upturn in new order intakes. Rising business activity and resilient demand conditions contributed to a greater uplift in staff hiring, with the rate of employment growth the fastest since June 2023.” the S&P survey read.

New orders continued to rise, driven by increased domestic spending and improving sales pipelines. Despite this, new business from abroad saw a slight decline, mainly due to reduced export sales in manufacturing.

Inflationary pressures moderated, with input cost inflation easing to its lowest rate in over three years.

The slowdown was primarily seen in the service sector, although manufacturing still faced higher costs due to rising freight and raw material prices. Firms passed on these costs to customers, but the pace of price increases was among the slowest since early 2021.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that while economic growth remains strong, GDP growth may slow in the third quarter compared to the first half of the year.

“The latest survey data therefore help lower the bar for further interest rate cuts, although the still-elevated nature of inflation in the service sector suggests that policymakers will move cautiously.” Williamson noted.