The latest flash purchasing managers’ index (PMI) survey shows growth of the UK private sector economy has slowed sharply in June to the weakest pace in three months. Services sector growth has decelerated markedly, and manufacturing output has continued to decline.
The Bank of England’s Monetary Policy Committee has raised UK base rates from 0.1% in December 2021 to 5%, with the latest rise, of a half-point, implemented on Thursday.
Although UK private sector growth eased, employment grew for a third straight month and at the fastest pace since September 2022, according to the survey published yesterday by the Chartered Institute of Procurement & Supply and S&P Global.
The seasonally adjusted, flash UK PMI composite output index, which measures services and manufacturing activity, has fallen to 52.8 in June. The May index reading was 54. The level of 50 is deemed to separate expansion from contraction.
The flash UK services PMI business activity index has declined to 53.7 this month. This index was at 55.2 in May.
And the flash UK manufacturing output index has come in at 47.7 in the latest survey. The May reading for this index was also 47.7.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “June’s flash PMI survey indicates that the UK economy has lost momentum again after a brief growth spurt in the spring, and looks set to weaken further in the months ahead.
“Most notably, consumer spending on services, which was a core growth driver in the spring, is now showing signs of faltering as the reality of higher interest rates, the increased cost of living and gloom about the outlook sets in and overrides the brief boost to spending enjoyed from the pandemic tailwind. The manufacturing sector meanwhile continues to report recessionary conditions.”
He added: “One notable area of resilience in the economy is the labour market, with jobs growth accelerating in June as companies in the service sector continue to fill vacancies. While falling backlogs of work suggest this hiring trend could also fade in the coming months as the economy weakens, for now it is generating higher wage growth, in turn feeding through to still-elevated inflation pressures in the service sector.”
CIPS chief economist John Glen said: “Recent interest rate rises will also add more stress on business investment. In the manufacturing sector, new orders fell again for another month, marking a year of shrinking workflows. Customer spending in the second half of 2023 is likely to shrink further as concerns over the UK economy gather pace with stretched affordability rates amongst consumers and businesses alike.”
