UK private sector growth falters in June
By Abigail Townsend
Date: Friday 23 Jun 2023
(Sharecast News) - The rate of growth in the UK's private sector slowed in June, a closely-watched survey showed on Friday.
The latest S&P Global/CIPS UK services PMI business activity index was 53.7 in June, a three-month low. Although above the neutral 50.0 level and indicating growth, it was below both May's 55.2 and consensus, for 54.8.
The manufacturing output index was unchanged, at 47.7, while the UK manufacturing PMI eased to a six-month low of 46.2, from 47.1 a month previously.
The flash UK PMI composite output index - a weighted average of the manufacturing and services indices - was 52.8, down on May's 54.0. Consensus had been for 53.6.
Overall, private sector growth was the slowest since March, S&P Global noted, which it said reflected a "much softer" rise in new order intake as some clients curtailed spending.
The inflationary picture was also mixed. Respondents to the manufacturing survey signalled an outright reduction in factory gate charges for the first time in more than seven years.
But services providers recorded yet more steep rises in average prices charged, as staff costs continued to weigh heavily.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "June's survey indicates that the UK 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 - a core growth driver in the spring - is now showing signs of faltering as the reality of higher interest rates, the increase cost of living and gloom about the outlook sets in."
John Glen, chief economist at the Chartered Institute of Procurement and Supply, said: "Inflationary rises were softer for the UK's makers than service providers, as prices for raw materials fell and delivery times improved for the firth month in a row.
"The service sector experienced the opposite effect. Almost 40% experienced higher business expenses in June, as rising salary payments more than offset falling fuel and energy bills.
"In the manufacturing sector, new orders fell again for another month, marking a year of shrinking workflows."
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: "S&P's survey continues to give an ambiguous steer on whether the Monetary Policy Committee already has done enough to cool the economy and curb CPI inflation.
"Our view is that the MPC will raise the bank rate to 5.25% in August, and to 5.5% in September, before standing pat in November."
The survey of 650 manufacturers and 650 service provides was carried out between 12 and 21 June. A reading above 50.0 indicates growth, while one below suggests contraction.
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