24th Jul 2025 09:56
(Alliance News) - A weak growth trajectory and job cuts in the UK will add to pressure on the Bank of England to cut rates again in August, S&P Global Market Intelligence Chief Business Economist Chris Williamson said Thursday, as service sector growth was lower than expected in July.
The flash UK purchasing managers' composite output index fell to 51.0 points in July from 52.0 in June, underperforming the FXStreet-cited market consensus of a milder slowdown to 51.9 in July. Getting closer to the neutral 50-point mark separating growth from contraction, it indicates the pace of growth slowed in July.
Notably, staffing numbers fell at the fastest pace since February, S&P Global highlighted. Respondents noted the need to cut headcounts due to higher payroll costs and subdued customer demand.
Further, input price inflation was up for the first time in three months in July, which signalled sharper cost pressures in the UK's manufacturing and service sectors.
The flash UK services PMI business activity index declined to 51.2 points in July from 52.8 in June, against expectations of an improvement to 53.0 in July.
S&P said: "July data indicated a renewed decline in total new work received by UK private sector firms, following a marginal rise in the previous survey period. This was driven by the sharpest fall in new orders across the service economy since April."
The flash UK manufacturing output index rose to 50.0 points in July, a nine-month high, from 47.0 in June.
The flash UK manufacturing index improved to a six-month high of 48.2 points in July from 47.7 in June, outperforming the consensus of 48.0.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: "The sluggish output growth reported in July reflected headwinds of deteriorating order books, subdued business confidence and rising costs, all of which were widely linked to the ongoing impact of the policy changes announced in last autumn's Budget and the broader destabilising effect of geopolitical uncertainty."
He added: "The weak growth trajectory and sustained culling of jobs will add to pressure on the Bank of England to cut rates again at its next policy meeting in August. It seems likely that the disappointing growth and labour market trends will increasingly dominate the inflation forecasting narrative, encouraging policymakers to 'look through' the recent rise in price pressures and instead focus on helping to revive growth."
The outlook for the UK is mixed, with S&P noting that private sector firms continue to expect a rise in business activity during the next 12 months, with the degree of confidence up a notch since June. It was however subdued compared to the post-pandemic trend.
"Survey respondents noted hopes of a boost from lower borrowing costs, pent-up customer demand and a rebound in global investment spending. Some manufacturers also commented on rising demand linked to greater defence spending. However, many firms noted severe headwinds from unfavourable domestic economic conditions, geopolitical instabilities and elevated global trade uncertainties."
The UK PMI features a panel of 650 manufacturers and 650 service providers, with responses collected between July 10 and 22. Final manufacturing data will be released next week Friday, while final services and composite data will be out on August 5.
By Tom Budszus, Alliance News slot editor
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