UK private firms signal renewed biz activity downturn in August: S&P

At 47.9 in August, down from 50.8 in July, the headline seasonally-adjusted S&P Global/ Chartered Institute of Procurement & Supply (CIPS) flash UK composite output index posted below the neutral 50 threshold for the first time since January.

The latest reading was the weakest since January 2021 and signalled a moderate reduction in UK private sector output.

The downturn mostly reflected a faster fall in new orders as sluggish domestic economic conditions and higher borrowing costs led to caution among clients.

Inflationary pressures continued to moderate in August, with input costs rising at the slowest pace for two-and-a-half years.

Average prices charged by UK private sector companies also increased at the softest rate since February 2021. Survey respondents suggested that they had adjusted their pricing strategies in response to weaker demand and falling input cost inflation.

Lower levels of activity were recorded in both the manufacturing and service sectors during the month, S&P Global said in a release.

Manufacturers saw a sharp and accelerated fall in production volumes, which extended the current period of decline to six months.

August data indicated a decline in new orders across the UK private sector economy for a second consecutive month.

Companies recording a drop in new orders typically cited a reluctance to spend among clients because of higher interest rates and stretched disposable household incomes.

Shrinking order books allowed for a steep reduction in backlog of work during August. This was the fourth successive monthly decline in unfinished work and the latest fall was the fastest since June 2020.

Excess capacity contributed to another round of job shedding across the manufacturing sector.

Measured overall, private sector employment in the United Kingdom rose only slightly and at the slowest pace since March.

Manufacturers reported the steepest fall in their purchase prices since January 2016. A combination of improving supply and lower demand led to an accelerated pace of destocking in August.

The degree of confidence regarding year-ahead growth prospects slipped to its weakest in August since December last year, but was still broadly in line with the long-run series average.

ALCHEMPro News Desk (DS)