Data released by S&P Global/CIPS showed that activity growth in the UK private sector accelerated moderately in July (for the first time since April), and exceeded economists' forecasts, helped by the strongest growth in new orders since April 2023 and an acceleration in employment growth to a 13-month high.
The UK composite PMI rose to 52.8 points from 52.3 points in June. Economists had expected an increase to 52.7 points. Meanwhile, the services PMI increased to 52.5 points from 52.1 points in June. Consensus estimates suggested an increase to 52.4 points. Both indices remain above the 50-point mark, which indicates an expansion of activity in the sector, for the ninth month in a row.
"With the general election period coming to an end at the start of July, survey data for last month showed the UK service sector enjoyed a modest rebound after a fairly subdued end to Q2. Overall, the latest survey results bode well for a reasonable GDP growth print in Q3. Still, there continues to be sluggish progress on inflation," said Joe Hayes, Principal Economist at S&P Global Market Intelligence.
The report showed that supporting higher output at service providers was the strongest upturn in demand since May 2023. New export orders also rose markedly in July. Meanwhile, employment growth in the service sector was the strongest since June 2023. Nevertheless, despite an expansion in new business that outpaced the concurrent rise in activity, backlogs of work were depleted for a fourteenth month in a row. As for the inflationary situation, increases in input costs and output prices remain well above their respectable pre-pandemic averages. Operating expenses were pushed higher by transportation, IT, wages and supplier fees. However, rates of inflation for input prices and output charges were among the softest seen in around three-and-a-half years. Meanwhile, the index of future activity rose to a five-month high in July.