Services And Manufacturing Boost In July

The private sector economy in the UK expanded faster than initially estimated in July. This was boosted by strong demand from overseas and the largest jump in new business in over 12 months, according to the S&P Global Purchasing Managers’ Index (“PMI”). The rate of new business creation among services businesses climbed to a post-May 2023 high. S&P attributed this to customers increasing spending after the general election provided some certainty.

The PMI measures activity in the services and manufacturing sectors. It rose to 52.8 in July from 52.3 in June. A measurement above 50 indicates growth.

S&P said that inflation in the private sector slipped to the lowest rate in around 3-and-a-half-years. It is thought that an easing in global energy and commodity costs helped reduce price pressures in the UK economy.

Services price growth also dropped to its lowest level since 2021, further indicating that we may see further interest rate cuts in 2024. As you are no doubt aware, the Bank of England lowered their UK base rate by 0.25% to 5% last week, which was the first reduction since March 2020.

Joe Hayes, principal economist at S&P Global Market Intelligence, said: “With the general election period coming to an end at the start of July, survey data for last month showed the UK service sector enjoyed a modest rebound after a fairly subdued end to [the second quarter].

“The business activity index crept up only slightly, but the new business index jumped by over three points to its highest level in 14 months as firms reported an influx of new clients and contracts.”

It is thought that the ONS will estimate positive GDP growth for the third quarter, giving the government a boost. GDP increased by 0.7% in the first quarter, the highest rate of the G7 nations.