Upswing in UK business activity gathers pace in August, PMI shows

4:33 am Thursday, August 22nd, 2024

By Andy Bruce

(Reuters) – British business activity accelerated this month and cost pressures eased to their weakest in over three years, according to a survey on Thursday that signalled steady growth momentum going into the second half of 2024.

The preliminary “flash” estimate of the UK S&P Global Composite Purchasing Managers’ Index rose in August to 53.4 from 52.8, the highest reading since April and above the median forecast in a Reuters poll of a economists of 52.9.

Readings above 50 denote growth and data company S&P Global said the figures were consistent with the economy expanding at a quarterly rate of 0.3%.

While that pace of growth would mark a slowdown from the first half of the year, when the economy rebounded from a brief recession, it is stronger than the typical pace of the past two years.

“August is witnessing a welcome combination of stronger economic growth, improved job creation and lower inflation, according to provisional PMI survey data,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Cost pressures faced by businesses increased at the weakest rate since January 2021, while the PMI’s gauge of businesses’ price increases also fell.

“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 said.

A Reuters poll of economists published on Wednesday suggested the Bank of England will cut interest rates just once more this year, in November.

The PMI for the services sector, which dominates Britain’s economy, rose to its highest level since April at 53.3, up from 52.5 in July and above the 52.8 poll consensus.

Factories also showed improved growth, with the manufacturing PMI hitting 52.5 from 52.1, its highest level since June 2022. The sector added jobs at the fastest pace in more than two years.

(Reporting by Andy Bruce; Editing by Christina Fincher)