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Economic activity in the UK slowed slightly in August as manufacturers were pummelled by weaker demand, but the services sector held up better than expected, survey data on Tuesday showed.
The S&P Global-Chartered Institute of Procurement & Supply flash UK composite purchasing managers' index slipped to an 18-month low of 50.9 points in August from 52.1 in July. The reading remains above the no-change mark of 50.0, indicating the economy is still growing, but is edging closer to stagnation.
This was due to the manufacturing PMI slumping to 46.0 from 52.1, well below expectations of 51.1.
‘UK manufacturers signalled a sharp and accelerated fall in production during August, with the rate of reduction the quickest seen since May 2020. Reduced customer demand, the delayed delivery of inputs and labour shortages all weighed on performance, according to panel members,’ said S&P Global.
Excluding the pandemic, the fall in manufacturing output was the quickest seen since the start of 2009, highlighted Annabel Fiddes, economics associate director at S&P Global Market Intelligence.
Meanwhile, the UK's all-important services sector was resilient with a score of 52.5, down only marginally from 52.6 in July. Consensus had pencilled in a larger drop to 52.0.
Input cost inflation across the private sector eased further, with the pace of increase the softest for nearly a year. However, this was not enough to boost confidence over the year ahead, with the overall degree of optimism only slightly above June's 25-month low.
‘The tightening of financial conditions via interest rate hikes, the cost of living crisis, labour shortages and strained supply chains are all likely to dampen economic performance further and keep costs elevated in the months ahead,’ said Fiddes.
Data were collected across August 12 to 19 from survey panels of around 650 manufacturers and 650 service providers.
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