The pound has reached a 13-month high against the dollar, trading at $1.3118, as British companies reported their fastest growth in four months during August. According to the latest S&P flash survey of purchasing managers, factors such as stronger economic growth, improved job creation, falling inflation, and lower interest rates have contributed to increased output in both the services and manufacturing sectors. The S&P Global purchasing managers’ index (PMI) for private sector activity increased for the tenth consecutive month, rising to 53.4 in August from 52.8 in July, marking the highest output figure since April. A PMI reading above 50 indicates overall growth.
Conducted a month after the general election, the survey showed that companies were more optimistic about the domestic economic outlook, leading to efforts to enhance business capacity. The manufacturing sector, which has struggled over the past two years, experienced its best monthly output since early 2022, with the PMI climbing to 52.5 this month. Additionally, services companies, which account for over three-quarters of the economy, reported an increase in output, rising to 53.3 from 52.5 in July.
Private sector surveys are crucial indicators of potential economic growth. The UK had the fastest-growing economy in the G7 during the first half of the year, and the rising PMIs suggest that this trend is continuing into the third quarter. Chris Williamson, chief business economist at S&P Global, indicated that these figures point to a projected third-quarter GDP growth of 0.3 percent, following a 0.6 percent expansion in the second quarter. The Bank of England’s decision to cut interest rates for the first time in four years, along with falling inflation and decreasing borrowing costs, has improved business sentiment. The survey also highlighted an increase in hiring this month, resulting in the fastest rate of overall employment growth since June of last year. In the eurozone, similar PMI figures rose from 50.2 to 51.2, influenced by the upcoming Olympics in Paris.
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