Strong UK services turnaround offsets manufacturing slowdown

The UK private sector experienced its fastest output expansion since April in August as a strong turnaround in service activity successfully offset cooling manufacturing production.

The seasonally adjusted S&P Global flash UK purchasing managers' index (PMI) for composite output posted 52.5 in August, up from 52.2 in July, marking a four-month high.

Business activity growth in the service economy accelerated to its strongest pace since February, pushing the services business activity index to a six-month high of 52.8.

Manufacturing production increased only marginally, at the weakest pace in five months, bringing the manufacturing output index down to a five-month low of 51.2.

A steady upturn in client confidence and improving domestic economic conditions drove the acceleration in the service economy.

Geopolitical uncertainties and elevated cost pressures constrained growth in the manufacturing sector.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the UK economy picked up a bit more pace in August, adding to signs of solid economic growth of around 0.3% in the third quarter.

Williamson noted that sunny weather and tech investment helped the expansion, while a softening of growth in the manufacturing sector cooled precautionary stock building.

Average cost burdens at private sector firms increased sharply in August as the rate of inflation quickened from a five-month low in July.

Survey respondents widely noted higher fuel prices and efforts by suppliers to pass on rising transportation costs alongside higher wages.