UK PMIs showed solid private sector expansion in August

S&P Global PMI reports for August reflected solid expansions in UK private sector activity, with the manufacturing sector rising to a 26-month high, while the services sector rose to a four-month high.

The composite index that measures both the manufacturing and services sectors was also in the spotlight as it hit its highest levels since April:

• Manufacturing PMI increased from 52.1 to 52.5
• PMI services improved from 52.5 to 53.3
• Composite PMI jumped from 52.8 to 53.4

According to the report, “increased business activity and resilient demand conditions contributed to higher employment growth, with the rate of employment growth fastest since June 2023.” Firms have also continued to pass on higher input costs by raising prices charged, although most recently price increases were “among the slowest seen since early 2021.“

Link to August S&P Global UK PMI reports

The report detailed,

“August sees a welcome combination of stronger economic growth, improved job creation and lower inflation…

… The latest survey data therefore helps to lower the bar for further interest rate cuts, although the still high nature of service sector inflation suggests that policymakers will proceed with caution.”

Market reaction

The pound sterling against major currencies: 5 min

GBP chart overlay against major currencies by TradingView

The overall strengths seen in private sector activity in August reduced the chances of an aggressive monetary policy easing trajectory from the Bank of England (BOE).

Unsurprisingly, the British pound traded higher against its major peers. Sterling even hit fresh intraday highs at the opening of the US session and held on to its gains, with the exception of the US dollar and the Swiss franc.