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The rise in average prices charged by UK businesses was the slowest in more than four years in June, as companies continued to shed jobs and economic activity remained subdued, according to a closely watched survey.
The S&P Global flash UK PMI index of monthly growth of price charged by businesses fell to 53.2 in June, from 55.4 in the previous month, the lowest since January 2021.
The latest reading was well below a peak of nearly 70 registered in 2022 and was close to 50, indicating no change, and will strengthen the case for the Bank of England to cut interest rates further at its next meeting in August.
“Rate setters will be relieved to see that the ‘awful April’ of indexed and government-set price increases, payrolls tax hikes, and a large jump in the minimum wage are demonstrating limited persistence so far,” said Elliott Jordan-Doak, economist at Pantheon Macroeconomics.
He said easing output price growth was consistent with services inflation slowing from 4.7 per cent in May to a projected 3 per cent in six months.
The data “should reassure the bank that it can continue cutting interest rates at the current pace of one 25 basis points rate cut per quarter”, given that employment is falling, he added.
Markets are split on whether the BoE will cut rates from 4.25 per cent at its next meeting on August 7, after holding steady in June. Since summer 2023, the BoE has delivered four rate cuts.
The survey, conducted from June 12-19, also showed input costs rising more slowly, but still outpacing output prices, suggesting little evidence of higher energy prices pushing up input prices.
The survey’s headline composite output index, a measure of monthly growth in the private sector, rose only marginally to 50.7 in June from 50.3 in the previous month.
“The UK economy remained in a sluggish state at the end of the second quarter,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
He said the reading was consistent with GDP growth rising only by 0.1 per cent in the second quarter, a marked slowdown from the 0.7 per cent registered in the first three months.
Employment fell for the ninth month in a row, as manufacturers reported another drop in overseas orders, linked to US tariffs and geopolitical uncertainty.
“Although June’s composite PMI is consistent with GDP flatlining in Q2, the Bank of England will be reassured that the recent cooling in the labour market finally appears to be weighing on services prices,” said Alex Kerr, economist at the consultancy Capital Economics.
