The UK private sector experienced a slight improvement in June, helping to ease concerns of a potential economic contraction in the second quarter, according to a new survey by S&P Global.
The Purchasing Managers’ Index (PMI) rose to 50.7 in June from 50.3 in May, exceeding analysts’ expectations and indicating marginal growth. A reading above 50 signals expansion, and this marks the highest level since March, signaling a modest rebound in business activity.
The survey noted that improved client confidence and increased orders were supported in part by trade agreements and falling borrowing costs, which contributed positively to demand.
Despite these gains, overall growth remains limited. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that the data points to economic growth of approximately 0.1% in the second quarter. “Although business conditions have improved since April’s downturn, growth of business activity remains disappointingly lacklustre,” Williamson said.
The services sector continued to expand modestly, helping to offset a significant decline in manufacturing activity. Businesses also reported ongoing challenges in export demand and continued cost pressures, which led to workforce reductions for the ninth straight month.
However, the report highlighted early signs of improving economic conditions. Inflationary pressures fell to a three-month low, and new orders rose for the first time in six months. Additionally, the average prices charged by UK firms increased at the slowest pace since 2021.
The combination of modest growth, easing inflation, and declining employment could influence the Bank of England’s monetary policy in the near term. Analysts suggest that these conditions may pave the way for another interest rate cut at the central bank’s next meeting in August.
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