British business activity experienced a notable uptick in July, following a lull before the July 4 election, driven by the fastest manufacturing growth in two years and the strongest influx of new orders since April 2023.
This positive trend is likely to be welcomed by Prime Minister Keir Starmer’s new government, which aims for accelerated growth to support increased public spending. Additionally, inflation pressures have dropped to their lowest levels in over three years, a favorable sign for the Bank of England.
The S&P Global Flash Composite Purchasing Managers’ Index (PMI) rose to 52.7 in July from June’s six-month low of 52.3, surpassing the 52.6 forecasted by economists.
This performance contrasts with the euro zone’s PMI, which fell to 50.1, indicating a near-recessionary state. Despite outperforming expectations, the UK’s economy has lagged behind most of the Group of Seven economies since the COVID-19 pandemic, with only Germany faring worse.
The services sector saw a slight rise, while the manufacturing sector exceeded expectations, achieving its highest level since July 2022.
This growth has instilled optimism among businesses, reflected in a surge in the future output component of the PMI, which jumped from 70.4 to 74.7 in July, the second-highest reading since February 2022. Additionally, export orders experienced their fastest growth since March 2023.