UK private sector grows at quicker pace on services acceleration

The UK private sector grew at a slightly faster pace in August, a preliminary reading showed on Friday, as the services economy shone.

The S&P Global flash composite purchasing managers' index rose to 52.5 points in August, a four-month high, from July's final tally of 52.2.

Moving further above the 50 point mark, the reading suggests growth picked up this month. The PMI also topped the FXStreet cited consensus of 51.6 points.

The composite PMI is calculated using the service and manufacturing sector data.

The services PMI rose to 52.8 according to the August flash, a six-month high, from 52.1 in July. The manufacturing PMI, however, eased to a five-month low of 51.5 from 51.9.

The services PMI beat consensus of 51.8. The manufacturing print landed in line.

S&P Global said: "August data indicated that business activity growth in the service economy accelerated to its strongest pace since February. Anecdotal evidence cited a steady upturn in client confidence and improving domestic economic conditions. In contrast, manufacturing production increased only marginally in August and at the weakest pace for five months. Geopolitical uncertainties and elevated cost pressures were reported as constraints on growth.

"Overall demand conditions improved again in August, as signalled by a further marginal rise in total new work received by UK private sector firms. The latest increase in new business was the fastest since February, driven by an acceleration in the service economy. Survey respondents noted higher business and consumer spending across domestic markets, which helped to offset weaker export sales."

S&P Global said "cost burdens at private sector firms increased sharply in August". The pace of inflation accelerated from July's five-month low.

"The acceleration was driven by stronger input price pressures in the service economy. Survey respondents widely noted higher fuel prices and efforts by suppliers to pass on rising transportation costs. A number of firms reported higher wages, while some cited increased food, technology and utility bills. Output price inflation also picked up in August, following a five-month low in July," S&P Global added.

Confidence improved for the third month running in August.

The PMI survey features a panel of 650 manufacturers and 650 services firms. The flash data is compiled using 80% to 90% of the responses.

Final August manufacturing data is released on September 1, before the services and composite readings two days later.

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