Key facts
- UK businesses saw growth for the first time in three months in July, with cost pressures easing.
- US business activity accelerated in July, with the services sector PMI rising to 53.6.
- US manufacturing PMI eased to 53.8, the slowest growth since March.
- Rising energy prices due to Middle East conflict pose a risk to the economic outlook.
- Business optimism in the UK reached its highest level since February.
UK businesses experienced growth for the first time in three months in July, with the S&P Global UK Composite Purchasing Managers' Index rising to 52.1 from 49.3 in June. This expansion was driven by a rebound in services and manufacturing, aided by a temporary easing of Middle East conflict that lowered oil prices and reduced cost pressures. Business optimism reached its highest level since February.
In the U.S., business activity also showed a solid start to the third quarter, with the services sector accelerating to its highest level since November, partly due to spending around the FIFA World Cup and Independence Day. However, manufacturing growth slowed to its slowest pace since March amid reduced precautionary stock building. The Purchasing Managers' Index surveys from S&P Global suggest the US economy is expanding at a 2.0% pace so far in the July-September period.
Despite the July gains, concerns remain about the sustainability of the economic upturn. The intensifying conflict in the Middle East has sent energy prices spiraling upward again, with global benchmark oil prices nearing $100 a barrel and average US gasoline prices climbing back above $4 a gallon. This could stifle improvements and exacerbate supply chain delays and price pressures, raising downside risks to the near-term economic outlook. The Bank of England is expected to hold its interest rate at 3.75% next week.