Yahoo Finance UK economy has slowest private sector growth since November as manufacturing at 26-month high
Fresh data published this morning shows the UK’s private sector growth has screeched to a seven month low, as uncertainty ahead of the election stalled decision making.
The latest S&P Global Flash UK PMI showed that output had dropped to the lowest level since November, to 51.7 in June, down from 53.0, in May.
The report said UK private sector business activity expanded in June at its slowest rate since last November, as slowing service sector growth was offset by improved manufacturing.
The Flash UK Manufacturing Output Index was at 54.2 in June, compared to 53.4 in May, a 26-month high.
It said that output at goods producers rose to the greatest degree since April 2022, driven by improved order book intakes and strong business confidence.
Services however grew “at its softest pace for seven months”, though it was suggested this is partially due to the election’s uncertainty.
War in the Middle East continued to wreak havoc also. The report showed UK firms faced increasing input cost inflation in June, due to global shipping constraints. This led to higher output charges, with producers upping their prices to the sharpest level since May last year.
It said the top line fall in output to was “signalling a slower and modest increase in business activity at the end of the second quarter of the year” while “the expansion was the softest recorded since November 2023.”
Despite the sluggish growth, the S&P survey showed that employment in the private sector was on an “upward trajectory” in June – but there was evidence hiring difficulties and cost-saving efforts have subdued the creation of new jobs.
It also pointed to a “weaker level of business confidence regarding future output at UK companies” in June, with evidence saying it “was fuelled by political uncertainty ahead of the general election.”
“Sentiment at services firms was especially affected, dropping to its lowest level for seven months. Aside from this, optimism towards future activity was still robust overall, with firms generally expectant of improving economic conditions, customer growth and new products driving increased output over the coming year.”
Chris Williamson, chief business economist at S&P Global Market Intelligence said: “Flash PMI survey data for June signal a slowing in the pace of economic growth, indicating that GDP is now growing at a sluggish quarterly rate of just over 0.1 per cent.
“The slowdown in part reflects uncertainty around the business environment in the lead up to the general election, with many firms seeing a hiatus in decision making pending clarity on various policies.
“Meanwhile, from an inflation perspective, stubbornly persistent service sector inflation – a major barrier to lower interest rates – remains evident in the survey, but should at least cool further from the current 5.7 per cent pace in coming months. However, companies’ costs are rising, most notably in manufacturing, where shipping costs in particular are spiking again and adding to a renewed rise in inflationary pressures from goods.
“In short, while a slowdown in economic growth may prove temporary, should businesses react positively to the policies announced by any new government, the stubbornness of underlying inflationary pressures above the Bank of England’s target still looks somewhat engrained.”
