UK July flash services PMI came in at 51.8, beating the 49.4 forecast, as S&P Global said firms reported stronger activity at the start of the third quarter.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the July data pointed to a faster pace of economic growth. He said hospitality firms got a lift from good weather, the FIFA World Cup, and more domestic holidays. However, he added that cost-of-living pressure kept overall services growth weak, while uncertainty still held back some foreign travel.
UK July Flash Services PMI Signals Faster Growth
Williamson said manufacturing grew faster than services, which he called unusual in recent years. He said rising exports supported factory output. However, he also warned that manufacturers and their customers kept building precautionary stocks, which many linked to supply chain disruption caused by the war in the Middle East.
As a result, he said part of the recent rise in factory activity may not last. He also said price pressures eased because oil prices were lower during the first half of the month. Therefore, that could add to speculation that the Bank of England may delay any interest rate increase.
Price Pressures Ease but Risks Remain
Williamson said inflation pressure still stayed high. He linked that to the ongoing energy shock and supply squeeze from the war in the Middle East, as well as earlier government policies that had already raised business costs. Additionally, he said those higher costs led to another drop in employment, which has fallen without a break since the Autumn 2024 Budget.
Business confidence for the year ahead improved in the survey period, Williamson said. He said that reflected some relief over lower geopolitical tensions and the related fall in oil prices. However, he added that renewed Middle East concerns in recent days mean a lasting cooling in price data and a durable rise in confidence are not assured.
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Source: InvestingLive
