LONDON (Reuters) – According to a significant poll released on Wednesday, British business activity increased this month, driven by the highest inflow of new orders since April 2023 and the quickest manufacturing growth in two years.
The numbers, which show that inflation pressures have dropped to their lowest point in more than three years, may excite both the Bank of England and Prime Minister Keir Starmer’s new administration, which is aiming for quicker growth to fund bigger public expenditure.
Despite above most forecasts’ growth projections thus far this year, Britain’s economy has not fared well since the COVID-19 outbreak.
Of the seven wealthy nations in the Group of Seven, only Germany has fared worse. This is because, following Russia’s full-scale invasion of Ukraine in 2022, natural gas prices in Europe spiked, hitting Germany even more severely than they did Britain.
From a six-month low of 52.3 in June, the S&P Global Flash Composite Purchasing Managers’ Index increased to 52.7 in July, which was somewhat higher than the 52.6 predicted by analysts surveyed by Reuters.
The smaller manufacturing sector outperformed forecasts, reaching its highest level since July 2022, while the services component increased somewhat less than anticipated.
S&P Chief Business Economist Chris Williamson stated, “The first post-election business survey paints a welcoming picture for the new government, with companies operating across manufacturing and services having gained optimism about the future.”
With the greatest growth in export orders since March 2023, the future output component increased from 70.4 to 74.7 in July, its second-highest figure since February 2022.
“Companies often commented on an improvement in market confidence and the securing of new contracts, following some reports of a pause in client spending decisions prior to the general election,” stated S&P.
Due to moderation in the services sector, businesses raised prices by the least since February 2021 and reported one of the lowest cost increases since January 2021.
Investors have reduced their wagers that the Bank of England would lower interest rates from their 16-year high of 5.25% as statistics last week revealed that wage growth and inflation in the services sector remained strong. The BoE will release updated inflation predictions on August 1.
(Editing by Christina Fincher; reporting by David Milliken)