June data indicated that output growth across the UK private sector was unchanged from the 15-month low seen in May, according to S&P Global. Resilient business activity trends were seen across the service economy as a whole, but manufacturing production growth eased further to its lowest since February 2021. Demand conditions remained subdued in June, with new order growth slowing for the fourth month running and to a greater extent than seen during May.
Worries about customer spending cutbacks and the impact of rapid inflation on the longer-term economic outlook led to another fall in business activity expectations, S&P Global said. Optimism at UK private sector companies has declined in each month since February and is now the lowest for just over two years, it noted.
June witnessed only marginal production growth amid widespread reports of weaker demand as well as ongoing supply issues. A sustained recovery in events and other areas of face-to-face consumer spending helped to boost business activity in the service economy. However, many survey respondents also cited growth headwinds from the cost of living crisis and heightened economic uncertainty.
The seasonally-adjusted index measuring new order volumes across the UK private sector as a whole dropped from 53.8 in May to 50.8 in June, which signalled only a marginal overall expansion and the weakest rate of growth since the recovery began in March 2021. Manufacturing order books were particularly subdued, with this index slightly below the 50 no-change threshold and pointing to the weakest performance for two years.
UK private sector firms cited hesitancy among clients and squeezed budgets due to rising inflation as key factors holding back demand. The rate of inflation in the United Kingdom was still the second-fastest since the index began in January 1998.
The need to pass on higher energy, fuel and wage costs to customers was widely reported by manufacturers and service providers alike in June. Concerns about persistently high inflation, alongside impending cutbacks to non-essential spending by households and businesses, contributed to another drop in output growth projections for the year ahead.
The business expectations index fell by 4.6 points in June, which was the largest monthly decline since the start of the pandemic. Both manufacturers and service providers reported the lowest degree of business optimism since May 2020.
