UK business momentum slows in June despite falling inflation -PMI

The private sector in the United Kingdom slowed dramatically last month, despite reduced inflation, as increased Bank of England interest rates weighed on demand, according to a poll released on Wednesday.

The S&P Global/CIPS services Purchasing Managers’ Index (PMI) for the United Kingdom fell to 53.7 in June from 55.2 in May, matching a preliminary estimate.

While this was still comfortably over the 50-point threshold that distinguishes expansion from contraction in the PMI survey, it was the lowest rating for the UK services sector since March and the worst month-on-month drop since August 2022.

The composite PMI, which includes manufacturing PMI data issued on Monday, also fell to a three-month low of 52.8, matching the flash estimate.

According to S&P, higher loan rates were having a significant impact on construction and real estate services.

The Bank of England unexpectedly hiked its main interest rate from 4.5% to 5% last month, the highest level since 2008, after inflation remained unchanged at 8.7% in May and Governor Andrew Bailey stated that there were indicators that inflation might be sluggish to reduce.

Some experts believe the rate hikes will send the UK into recession later this year, despite the fact that the economy only gained 0.1% in the three months to the end of April.

Overall input cost inflation was at its lowest since May 2021, although it was still more than pre-pandemic levels, according to S&P Global.