Economic Buzz: UK output growth slows in July as service sector recovery loses momentum

UK private sector output continued to increase in July, according to the latest survey data from the S&P Global Flash UK PMI. However, the rate of growth was only marginal and lost momentum since June amid a renewed decline in new work.

Staffing numbers decreased at the fastest pace since February. Survey respondents widely commented on the need to reduce headcounts in response to higher payroll costs and subdued customer demand. Input price inflation accelerated for the first time in three months in July, reflecting stronger cost pressures in both the manufacturing and service sectors.

Adjusted for seasonal influences, the S&P Global Flash UK PMI Composite Output Index registered 51.0 in July, down from a nine-month high of 52.0 in June. The latest reading was above the 50.0 no-change mark for the third month running and signalled a marginal increase in business activity levels.

Output growth was driven by the service economy in July, with some survey respondents commenting on an uptick in consumer spending. Service providers widely noted headwinds to sales pipelines from fragile domestic economic conditions and elevated geopolitical uncertainty.

Manufacturing production meanwhile stabilized in July, which ended an eight-month period of contraction. Goods producers nonetheless widely commented on challenging business conditions, especially in major export markets as US tariffs resulted in delayed spending decisions.

Overall export sales decreased for the ninth consecutive month, albeit to the least marked extent since January. Service providers also recorded a decline in new work from abroad in July, but the rate of contraction was only marginal.

Lower volumes of new work contributed to a reduction in private sector employment for the tenth consecutive month during July. Average cost burdens increased sharply across the private sector economy, with the overall rate of input price inflation accelerating from June' s six-month low.

Meanwhile, prices charged by private sector businesses increased at a robust pace in July, with the rate of inflation picking up for the first time since April.

Looking ahead, private sector firms on balance continue to anticipate a rise in business activity during the next 12 months.

Powered by Commodity Insights