Economic Buzz: UK private sector output growth hit a one-year high
August data pointed to a solid upturn in business conditions across the UK service sector, with output and new work rising markedly. Business expectations for the year ahead also gained momentum in August, with confidence hitting a ten-month high.
Survey respondents cited lower borrowing costs, hopes of a turnaround in customer demand and fewer concerns about the impact of US tariffs. Employment remained a weak spot in August. Workforce numbers decreased for the eleventh consecutive month, reflecting widespread concerns about the impact of rising payroll costs.
Service providers often commented on a general improvement in trading conditions, the release of pent-up demand and support from lower borrowing costs. New orders returned to expansion, following a moderate decline in July.
A combination of spare capacity and intense margin pressures linked to rising payroll costs led to another decrease in staffing numbers across the service economy.
The seasonally adjusted S&P Global UK PMI Composite Output Index registered 53.5 in August, up from 51.5 in July, to remain above the neutral 50.0 threshold for the fourth consecutive month. Moreover, the rate of business activity expansion was the strongest since August 2024.
Faster output growth reflected a rise in new orders for the second time in the past three months. Although only modest, the latest increase in new business was the sharpest since October 2024.
Job shedding persisted in August, despite a sustained improvement in business activity expectations. A number of firms cited hiring freezes due to spare capacity and pressure on margins from rising payroll costs.
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