By Andy Bruce
In the latest report released on Thursday, British business activity has shown signs of acceleration this month, with cost pressures easing to their weakest level in over three years. This indicates steady growth momentum as we head into the second half of 2024.
The preliminary "flash" estimate of the UK S&P Global Composite Purchasing Managers' Index for August rose to 53.4 from 52.8, the highest reading since April. This exceeded the median forecast of economists in a Multibagger poll, who had predicted a reading of 52.9.
Readings above 50 signify growth, and S&P Global stated that these figures are consistent with the economy expanding at a quarterly rate of 0.3%. Although this pace of growth represents a slowdown from the first half of the year, it is stronger than the average pace of the past two years.
Chief business economist at S&P Global Market Intelligence, Chris Williamson, commented, "August is witnessing a welcome combination of stronger economic growth, improved job creation, and lower inflation, according to provisional PMI survey data."
Cost pressures faced by businesses have increased at the weakest rate since January 2021, and the PMI's gauge of businesses' price increases has also fallen. This could potentially lower the bar for further interest rate cuts, although policymakers are likely to proceed cautiously due to the still-elevated nature of inflation in the service sector.
According to a Multibagger poll of economists published on Wednesday, the Bank of England is expected to cut interest rates just once more this year, in November.
The services sector, which dominates Britain's economy, saw its PMI rise to 53.3, the highest level since April. Factories also showed improved growth, with the manufacturing PMI hitting 52.5, its highest level since June 2022. Job creation in the sector was at its fastest pace in over two years.
Analysis and Breakdown:
In summary, the latest data indicates that the UK economy is experiencing a period of steady growth, with business activity picking up and cost pressures easing. This could potentially lead to further interest rate cuts by the Bank of England, as policymakers monitor the situation cautiously. For investors, this could mean opportunities for growth in the UK market, particularly in the services and manufacturing sectors. It is important to stay informed and keep an eye on future developments to make informed investment decisions.