The private sector economy in the UK demonstrated stronger growth in August, surpassing analysts' predictions. The S&P Global composite PMI, a key indicator of economic health, rose to 53.8 from 52.8 in July, marking a four-month high and indicating expansion. This growth was fueled by improvements in the services sector, with the services PMI climbing to 53.7, as well as stable macroeconomic conditions and increased consumer spending following the general election in July.
Analysts attributed the positive economic performance to greater political stability and expectations of interest rate cuts by the Bank of England. Inflation in prices charged by services companies decreased, and input costs saw the weakest point since January 2021. Despite this, official statistics showed a slight increase in inflation to 2.2% in July. Tim Moore, economics director at S&P Global Market Intelligence, noted the recovery in the service sector's performance, citing improved economic conditions and domestic political stability as factors driving customer demand.
The UK economy's fast growth during the first half of the year was highlighted in recent GDP data. The PMI survey, which collects input from various industries within the services sector, signaled an uptick in economic activity. However, concerns remained about potential tax hikes or spending cuts in Chancellor Reeves's upcoming budget, impacting business expectations for future trading conditions. Services firms reported increased costs due to strong wage pressures and rising shipping rates, leading to the Bank of England's interest rate cut in August and the expectation of further cuts.