FX.co ★ UK Private Sector Growth Slowest In 11 Months

The expansion of private sector activity in the UK slowed to its least vigorous pace in nearly a year this October, primarily due to subdued demand and increasing economic uncertainties, as reported by a preliminary survey from S&P Global released on Thursday.

The preliminary composite output index fell to 51.7 in October, down from 52.6 in September. Despite this decline, a reading above 50.0 still indicates growth within the private sector. Analysts had anticipated the index to hold steady at 52.6.

This recent metric reflects only a modest increase in private sector output.

According to the survey, service providers experienced a slightly quicker expansion of business activities compared to manufacturing firms in October. However, both sectors experienced a decrease in momentum since September.

The index measuring business activity in services slipped to an 11-month low of 51.8 in October, down from 52.4 in August, with predictions previously set at 52.3.

Meanwhile, the manufacturing Purchasing Managers' Index dropped to a six-month low of 50.3 from September's 51.5, falling short of economists' expectations of 51.5.

New orders rose at their slowest pace in four months, influenced by clients adopting a 'wait-and-see' approach. This contrasted with resilient demand in the service industry and an outright decline in new orders for manufacturers.

Overall employment in the private sector saw a renewed decline in October, hindered by excess capacity, cost pressures, and prevalent concerns about the business outlook affecting employment trends.

Regarding pricing, input price inflation eased to its lowest point in 47 months, largely due to reduced fuel costs and occasional drops in commodity prices. Consequently, selling price inflation saw an uptick.

Looking forward, expectations for output over the next year have diminished, with overall confidence reaching its lowest level since November 2023. Both the manufacturing and service sectors have revised their growth projections downward due to intensified political uncertainties domestically and internationally.

"Encouragingly, a further moderation of input cost inflation to its lowest level in four years might allow the Bank of England to adopt a more aggressive stance on reducing interest rates, should the current economic slowdown continue to deepen," commented Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.