UK’s PMI data for August showed positive momentum across both the manufacturing and services sectors. PMI Manufacturing edged up from 52.1 to 52.5, surpassing expectations of 52.2 and marking a 26-month high. PMI Services also rose from 52.5 to 53.3, above the expected 52.8. This led to PMI Composite increase from 52.8 to 53.4.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, highlighted the significance of these figures, noting that “August is witnessing a welcome combination of stronger economic growth, improved job creation, and lower inflation.” He emphasized that both manufacturing and service sectors are showing solid output growth and increased job gains, with business confidence remaining historically high.
However, Williamson tempered expectations by pointing out that while GDP growth is likely to slow in Q3 compared to the impressive gains seen earlier in the year, the PMI data still indicates the economy is expanding at a “reasonably solid quarterly rate of around 0.3%.”
On the inflation front, pressures have continued to moderate, particularly in the service sector, which has been a key area of concern for BoE. Williamson suggested that the latest survey data could “lower the bar for further interest rate cuts,” though he cautioned that the still-elevated nature of service sector inflation means that policymakers are likely to proceed with caution.
