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The UK private sector fell back into contraction in August, survey results suggested on Wednesday, amid a renewed deterioration in the services sector.
The S&P Global/CIPS flash UK composite purchasing managers’ index fell to a 31-month low of 47.9 points in August from 50.8 in July.
Coming in below the 50-point no-change mark, it shows the UK private sector has fallen into contraction. Market expectations had been for a reading of 50.3, according to FXStreet-cited consensus.
After a string of readings showing growth, the flash services PMI fell to a seven-month low of 48.7 points in August from 51.5 in July and compared to expectations of 50.8.
Manufacturing also deteriorated at a faster pace than expected, with the PMI falling to 42.5 from 45.3. It was a 39-month low and below market expectations of 45.0.
The contraction reflected a faster fall in new orders as clients became more cautious amid higher borrowing costs and ‘sluggish’ domestic economic conditions.
Inflationary pressures continued to ease over the month, but S&P Global noted ‘many reports’ of persistently strong wage pressures. Higher wages were the most frequently cited factor causing an increase to input costs, particularly in the service sector.
Expectations around business activity edged down slightly, as confidence about year-ahead growth fell to its lowest reading since December. However, S&P noted it was ‘still broadly in line’ with the long-run series average.
‘The early PMI survey for August suggests that inflation should moderate further in the months ahead, but also indicates that the fight against inflation is carrying a heavy cost in terms of heightened recession risks,’ said Chris Williamson, S&P Global Market Intelligence chief business economist.
‘A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival. The survey is indicative of GDP declining by 0.2% over the third quarter so far.’
The flash PMIs are compiled by S&P Global from responses to surveys sent out to around 650 manufacturers and 650 service providers in the UK. Responses are collected in the second half of the month.
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