UK August flash services PMI rises to 52.8, beating expectations of 51.8
Key Takeaways
- •The UK's flash services PMI rose to 52.8 in August, beating the 51.8 forecast and up from 52.1 previously, with services carrying the largest weight in the country's economic output.
- •The flash manufacturing PMI slipped to 51.5 from 51.9 in line with expectations, while the composite PMI increased to 52.5 against a projected 51.6.
- •S&P Global's Chris Williamson said the data signal solid third-quarter growth of around 0.3%, helped by sunny weather and tech investment, as manufacturing softens with the cooling of precautionary stock building.
- •Cost pressures remain high, driven by energy prices, supply disruption linked to the Middle East conflict, and elevated staffing costs.
- •Williamson indicated the Bank of England is likely to maintain a hawkish bias while staying cautious and holding off on rate hikes until growth and inflation trajectories become clearer.
The UK's flash services PMI rose to 52.8 in August, beating the expected reading of 51.8 and up from the prior figure of 52.1. Services make up the bulk of UK economic output, which gives the sector outsized influence over the country's overall growth picture.
The flash manufacturing PMI came in at 51.5, in line with expectations of 51.5 and down from the prior reading of 51.9. The flash composite PMI, which combines the manufacturing and services sectors, rose to 52.5 against an expected 51.6, up from the prior 52.2, with the gain led by the stronger services reading given the sector's larger weight in the economy.
The PMI surveys are compiled by S&P Global and are based on responses from purchasing managers across the private sector. Readings above 50 indicate expansion in business activity, while readings below 50 signal contraction. The flash estimates are published ahead of final data and are based on the majority of each month's survey replies; final figures, released later in the month, are subject to revision. Because the surveys are among the first monthly readings of business conditions available, they are watched closely by the Bank of England and by markets as an early steer on momentum ahead of official growth statistics.
Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
"The UK economy picked up a bit more pace in August, adding to signs that we should see solid economic growth of around 0.3% in the third quarter. The expansion is being helped by sunny weather and tech investment, though as expected we have seen some softening of growth in the manufacturing sector as precautionary stock building cools. This reflects easing concerns, for now, over the economic impact of the war in the Middle East. Businesses are feeling more upbeat than at any time since the war began. Job losses are also moderating.
"It's clear, however, that the Middle East and concerns over domestic government policy continue to have a damaging effect. Most worryingly, cost pressures remain high, largely due to energy prices and supply disruption linked to the Middle East conflict alongside high staffing costs.
"The data suggest the Bank of England looks likely to keep a hawkish bias but will stay cautious, holding off any rate hikes until the growth and inflation trajectories become clearer."
Source: ForexLive
