Market Analysis

British services companies reported a surge in new orders and the highest employment growth in over a year during July, fueled by rising optimism following Prime Minister Keir Starmer's election win, according to a survey released on Monday.

The S&P Global UK Services Purchasing Managers Index (PMI) increased to 52.5 in July from 52.1 in June, and was slightly revised up from an initial estimate of 52.4.

The survey indicated a positive shift in business sentiment since Starmer's Labour Party won a landslide victory in the July 4 election. The index for new business reached its highest level since May of the previous year, and the future activity index hit a five-month peak. S&P Global attributed these improvements to the election results and expectations of lower interest rates.

Last week, the Bank of England reduced interest rates to 5.0% from a 16-year high of 5.25%, marking its first rate cut since March 2020.

Joe Hayes, principal economist at S&P Global Market Intelligence, noted that while it is early in the second half of 2024, the survey results suggest a promising GDP growth outlook for Q3. However, he cautioned that price pressures, though near their lowest since early 2021, remain historically high, which may prompt the BoE to proceed cautiously with further rate cuts.

The composite PMI, which merges the services data with the manufacturing survey results, climbed to 52.8 in July from 52.3 in June, and was revised up from an initial estimate of 52.7. The manufacturing PMI revealed that output in British factories grew at a faster rate in July than in any other developed market surveyed by S&P Global.

Paraphrasing text from "Reuters" all rights reserved by the original author.