UK PMI Flash Report: A Strong Start for August 2024
The latest S&P Global Flash UK PMI® data for August 2024 reveals robust growth in the UK private sector, highlighted by significant increases in business activity and improved job creation. The data, collected between August 12 and August 20, demonstrates the highest rise in private sector output since April, providing a positive outlook for the UK’s economic performance in the near term.
Key Highlights of August 2024 PMI Data
1. Composite Output Index at a Four-Month High
The Flash UK PMI Composite Output Index surged to 53.4 in August, up from 52.8 in July. This is the highest reading in four months, reflecting a solid increase in private sector business activity. The index has now remained above the 50.0 no-change threshold for ten consecutive months, signaling continued expansion in the UK economy.
2. Services and Manufacturing Performance
- Services PMI: The Flash UK Services PMI Business Activity Index rose to 53.3, its highest level in four months. This increase is attributed to stronger business and consumer spending.
- Manufacturing PMI: The Flash UK Manufacturing PMI reached 52.5, a 26-month high, although manufacturing output eased slightly to 54.2 from July’s near two-and-a-half-year high.
Economic Drivers and Sectoral Insights
Robust Increase in New Orders
August’s data highlights a continued upward trend in new order volumes, driven by improved sales pipelines and increased domestic spending. This positive development is supported by softer inflationary pressures and lower borrowing costs, contributing to a sustained recovery in UK economic conditions.
Sectoral Variations
- Manufacturing: Despite a robust overall performance, new business from abroad decreased slightly, particularly due to lower demand from EU clients. Export sales in the manufacturing sector faced challenges, leading to a reduction in backlogs of work.
- Services: The service sector saw significant growth, with higher staffing levels and a faster reduction in backlogs, attributed to increased hiring and capacity expansion.
Employment and Inflation Trends
Employment Growth
The rate of job creation in the private sector reached its fastest pace since June 2023. Both manufacturing and service sectors reported increased staffing levels, driven by positive business activity expectations and a more favorable economic outlook.
Inflationary Pressures
Input cost inflation eased to its lowest level since January 2021, reflecting a slowdown in cost pressures within the service sector. However, manufacturing input prices remained elevated due to rising freight and raw material costs. Despite this, the increase in average prices charged by firms was among the slowest since early 2021.
Market Implications and Future Outlook
Economic Growth and Inflation
According to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, the August data indicates stronger economic growth and improved job creation. Although GDP growth may moderate in the third quarter compared to the impressive gains of the first half of the year, the PMI data suggests a steady quarterly growth rate of around 0.3%.
Interest Rate Outlook
The moderation of inflationary pressures, especially in the service sector, could influence the Bank of England’s future interest rate decisions. While inflation remains a concern, the data supports a more cautious approach to rate cuts, with the potential for further easing in monetary policy if conditions allow.
Leave a Reply