Activity rebounded on good weather and World Cup, though growth remained lacklustre. Manufacturing now growing faster than services; sustained cooling not assured, S&P Global economist said.
Alpha Score of 51 reflects moderate overall profile with moderate momentum, moderate value, moderate quality. Based on 3 of 4 signals – score is capped at 90 until remaining data ingests.
The UK services sector expanded more than expected in July, with the S&P Global flash purchasing managers' index rising to 51.8 from 49.4 in June. Economists had forecast a reading of 49.4.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the stronger activity pointed to a faster pace of economic growth at the start of the third quarter. Hospitality companies saw demand boosted by good weather and the FIFA World Cup, he said, though overall services growth remained lacklustre amid cost-of-living pressures.
Manufacturing is now growing faster than services, buoyed by rising exports, Williamson said. He cautioned that manufacturers and their customers continued to build precautionary stocks, widely linked to supply chain disruption caused by the war in the Middle East. "Part of the recent factory upturn could prove short-lived," he said.
Price pressures cooled thanks to lower oil prices seen during the first half of the month, Williamson said. "That could strengthen speculation that the Bank of England will hold off raising interest rates," he added. Inflationary pressures remain elevated, with the energy shock and Middle East supply squeeze adding to cost pressures from earlier government policies.
These higher costs led to a further fall in employment, which has declined continuously since the Autumn 2024 Budget, Williamson said. Business optimism about the year ahead improved, reflecting some relief at reduced geopolitical tensions and the associated drop in oil prices. "A sustained cooling in the price data and upturn in business confidence is by no means assured," he said, with Middle East worries flaring up again in recent days.
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