UK's private sector registers slow growth in June 2023: S&P Global

At 52.8 in June, down from 54 in May, the headline seasonally adjusted S&P Global / CIPS Flash UK Composite Output Index signalled only a moderate expansion of private sector business activity. The index has registered in positive territory since February, but the rate of growth eased further from April’s recent peak and was softer than the long-run survey average.

Output levels in the manufacturing sector decreased moderately during June and the rate of contraction was unchanged since May. Production cutbacks were attributed to falling new orders amid subdued underlying demand and a headwind from customer destocking, as per S&P Global.

Total new work across the UK private sector increased only slightly in June, with the rate of expansion easing further from April’s 13-month peak. The latest rise in new orders was the slowest in the current five-month period of growth. Manufacturers experienced a steep and accelerated fall in new work, with survey respondents citing weak market conditions at home and abroad.

Despite softer rates of output and new business growth across the private sector economy, latest survey data signalled continued strength in the labour market. Job creation was recorded for the third month running and the pace of staff hiring was the fastest seen since September 2022.

Supply conditions improved again in June, as signalled by a reduction in vendor lead times across the manufacturing sector for the fifth successive month. Fewer instances of supply shortages encouraged firms to reduce their inventories, with stocks of purchases decreasing at the steepest pace since May 2020. However, weaker-than-expected demand meant that manufacturers’ stocks of finished goods increased to the greatest extent since November 2022.

A combination of lower demand and improving supply conditions led to a steep decline in manufacturers’ average cost burdens during June. The decrease in manufacturing input costs was the fastest since February 2016. Around 26 per cent of the survey panel reported lower purchasing costs in June, while only 11 per cent signalled a rise.

Total private sector input cost inflation was the softest since February 2021, but prices charged inflation eased only slightly in June.

Looking ahead, private sector firms remain optimistic about their prospects for output growth during the next 12 months. The degree of confidence slipped to its lowest since January, but was still higher than the long-run survey average. Relatively upbeat expectations were recorded in the manufacturing sector, despite some reports citing concerns about the impact of higher interest rates and softer customer demand due to housing market weakness. Survey respondents typically noted resilient market conditions and positive sentiment regarding their long-term business expansion plans.

Fibre2Fashion News Desk (DP)