July saw a slowdown in business activity growth in the UK private sector, according to new data.
The S&P Global/CIPS composite Purchasing Managers’ Index, which measures elements of the manufacturing and services sectors, showed a deepening manufacturing downturn and a further cooling of growth in the service sector.
Although at 50.7 the survey’s headline index remained above the 50.0 no-change level to register an expansion of output for a sixth month in a row, the rate of growth slowed considerably.
The latest rise in output levels was the weakest for six months, largely due to flatlining new orders and sharply reduced backlogs of work.
“Rising interest rates and the higher cost of living appear to be taking an increased toll on households, dampening a post-pandemic rebound in spending on leisure activities,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “Meanwhile, manufacturers are cutting production in response to a worryingly severe downturn in orders, both from domestic and export markets.”
The fall in factory production recorded in July was the steepest since December 2022, while the latest increase in service sector output was the smallest recorded in six months.
Williamson added that various forward-looking indicators — such as order book inflows, levels of work-in-hand and future business expectations — point to growth weakening further in the coming months. This adds to a risk of GDP falling in the third quarter.
“Higher borrowing costs are here to stay and the private sector knows it,” said Dr John Glen, CIPS chief economist. “Interest rate hikes are not just affecting new orders today but spending plans long into the future.
“The biggest concern is increasingly not if the UK economy will enter recession but for how long.”
