Britain’s economy grew in August, but is expected to contract soon according to PMI indices

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Britain’s economy expanded in August, according to a closely watched business survey.

The monthly S&P Global PMI series, however, confirmed that a continued slowdown in activity is underway as consumers and businesses grapple with rising levels of inflation and the direction of travel is consistent with growth. negative in the coming months.

The S&P Global PMI for the services industry came in at 52.5 in August, higher than the market expected 52.0 and slightly lower than July’s 52.6.

Manufacturing, however, contracted noticeably to 46.0 as the market looked for growth to 51.0. The July figure was pegged at 52.1.

It has been reported that manufacturers have suffered a drop in customer demand, delays in the delivery of inputs and labor shortages.

The composite PMI, which balances the data to take into account the broader economy, came in at 50.9, below the 51.3 expected and the previous month’s 52.1.

S&P Global said the rate of expansion was the weakest in 18 months and indicated only a marginal increase in production. The loss of momentum was often linked by panelists to relatively weak customer demand as well as labor and input shortages.

Easing demand led to a further drop in the stock, while employment grew at the slowest pace in 17 months.

There has been some good news, however, as inflation levels seen at the “factory gate” cool.

The report finds that the rate of cost inflation has eased especially among manufacturers, reaching the lowest since November 2020.

This seems to be the effect of a several-week decline in commodity prices that is beginning to be felt.

In the services sector, S&P Global reports that the rate of cost inflation accelerated slightly during the month. Service providers generally noted higher salaries, often spurred by the rising cost of living.

This will be of interest to policymakers at the Bank of England as it suggests that inflation is building into wage deals and therefore widening.

It is in line with market expectations for further interest rate hikes at each of the remaining meetings of 2022.

However, this is a better result than the 49.0 expected by the market.

S&P Global reports that cost of living pressures in the Eurozone have undermined demand in the services sector (50.2), leaving activity just inside growth territory, while manufacturing remained down (49.7) in the middle of the third quarter of the year.

The German manufacturing PMI came as a surprise, coming in at 49.8, better than the 48.2 the market was looking for.

Services PMI read at 48.2 however, which is below the expected 49.0 and a slowdown from July’s 49.7.

The composite PMI – which balances the data to give a better idea of ​​overall economic activity – comes in at 47.6, which is slightly better than the 47.8 the market was looking for and just below the 48.1 of July.