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Financial News: UK Private Sector Grows At Slowest Pace In

UK Private Sector Grows At Slowest Pace In 7 Months

06/21/2024 - 09:37:00 (RTTNews)

(RTTNews) - The UK private sector growth weakened to a seven-month low in June as the slowdown in the service sector growth offset the stronger performance in manufacturing, flash survey results published by S&P Global revealed on Friday.

The flash composite output index dropped unexpectedly to 51.7 in June from 53.0 in May. The score was forecast to rise marginally to 53.1.

A reading above 50.0 suggests expansion in the private sector. The latest score signalled the softest expansion since November 2023.

While manufacturing output expanded at the strongest pace since April 2022 on stronger order book intakes and robust business sentiment, services activity grew at its softest pace in seven months.

At 51.2, the services business activity index declined from 52.9 in May. The expected reading was 53.0.

The manufacturing Purchasing Managers' Index posted 51.4, up from 51.2 in the previous month. The score was slightly above forecast of 51.3.

There was an uptick in new business, with the pace of growth unchanged from May. The survey showed a marginal fall in new export orders, ending a two-month period of marginal gains.

Employment remained on an upward trajectory, having increased in every month of 2024 so far. That said, the rise in employment softened from May.

Inflationary pressures were back on the rise in June as companies reported a steep increase in transport costs linked to global shipping bottlenecks. Input price inflation advanced from its 40-month low in May.

Prices charged inflation increased to a four-month high in June as both manufacturing and services firms raised their selling prices to a faster degree.

Business confidence weakened in June due to political uncertainty ahead of the general election.

S&P Global Market Intelligence Chief Business Economist Chris Williamson said GDP is growing at a sluggish quarterly rate of just over 0.1 percent.

".while a slowdown in economic growth may prove temporary, should businesses react positively to the policies announced by any new government, the stubbornness of underlying inflationary pressures above the Bank of England's target still looks somewhat engrained," added Williamson.

Although services inflation remained stubborn, the slowdown in the economy may mean the BoE will still be able to cut interest rates by a quarter-point at the August meeting, Capital Economics' economist Ashley Webb said.

If price pressures remain sticky, rate cuts thereafter may be a bit slower and smaller currently expected, Webb noted.

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