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UK Private Sector Growth Moderates In July

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The UK private sector growth slowed to a four-month low in July as the shortages of staff and materials weighed on recovery, flash survey results from IHS Markit showed on Friday.

The Chartered Institute of Procurement & Supply composite output index dropped more-than-expected to 57.7 from 62.2 in June. The reading was seen falling to 61.9.

Nonetheless, the index has remained above the 50.0 no change level for the fifth consecutive month in July.

The speed of recovery eased to the weakest since March, with survey respondents widely reporting staff and raw material shortages due to the pandemic.

"July saw the UK economy's recent growth spurt stifled by the rising wave of virus infections, which subdued customer demand, disrupted supply chains and caused widespread staff shortages, and also cast a darkening shadow over the outlook," Chris Williamson, chief business economist at IHS Markit, said.

Largely reflecting weaker rates of output and new order growth, the manufacturing Purchasing Managers' Index came in at 60.4, down from 63.9 in June and also well below economists' forecast of 62.7.

The services PMI declined to 57.8 from 62.4 in the prior month. The reading was expected to drop moderately to 62.0.

The fall in the composite PMI is not as worrying as it seems since the largest gains following the easing of restrictions have already been realized, Kieran Tompkins, an economist at Capital Economics, said.

But comments in the press release citing drags on growth from self-isolations means that the resurgence of the virus is becoming a growing downside risk to the forecast for GDP to return to its February 2020 level in October, the economist added.

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