The UK private sector continues to expand as manufacturing recovers

The UK private sector economy signaled further expansion in May as manufacturing recovers again, although at a slower-than-expected pace, preliminary results from an S&P Global survey showed on Thursday.

The composite manufacturing index fell to 52.8 in May from an April high of 54.1. The expected result is 54.0. However, a reading above 50.0 indicates expansion in the private sector.

Overall growth in the UK private sector was attributed to a strong recovery in industrial production, with the PMI rising to a 22-month high of 51.3 from 49.1 the previous month.

Services activities saw further growth in May on the back of growth business and consumer spending, but the pace of growth fell to its lowest level in six months. The Services Purchasing Managers’ Index, or PMI, fell to a six-month low of 52.9 in May from 55.0 in April.

The pace of new orders in the private sector fell to its lowest level so far this year. An equally moderate increase in new orders was recorded in services and industry. The number of new export orders also increased for the second month in a row.

Despite continued output growth, the UK economy experienced a weakening labor market in May as employment levels rose only at a marginal pace. Some companies continued to report delays in hiring due to candidate shortages and cost considerations.

On the price front, input price inflation fell to a seven-month low, reflecting softer increases in input costs in both the manufacturing and services sectors. As a result, sales price inflation fell to its lowest level since February 2021.

Looking ahead, business prospects for the coming year remained optimistic, despite contrasting patterns in the two main industries.

“With companies now seeing their slowest price growth in over three years and headline inflation falling close to target, PMI data supports the view that the Bank of England will start to cut interest rates in August, provided data continues to move in the right direction in the summer ” said Chris Williamson, chief business economist at S&P Global.

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by Midhin PKRTTNews Staff Writer

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