UK PMI Signals Second Month of Contraction as Services Slump Deepens

The UK economy showed little sign of regaining momentum in June, with the Flash Composite PMI Output Index falling from 49.7 to 49.4, its lowest level in 14 months. The survey signaled a second consecutive month of contraction, driven primarily by weakness in the services sector. The Services PMI Business Activity Index declined from 49.3 to 48.7, its lowest reading in 41 months, while manufacturing provided a partial offset, with the Manufacturing Output Index rising from 52.2 to 53.6, the strongest level in nearly two years.

According to S&P Global’s Chris Williamson, the data point to an economy that effectively flat-lined through the second quarter. Consumer-facing services remained under pressure, while manufacturers continued to benefit from inventory building as firms sought protection against supply disruptions linked to the Middle East conflict. However, Williamson cautioned that this manufacturing strength may prove temporary, as demand is being supported by precautionary stockpiling rather than sustained improvements in underlying activity.

The survey also highlighted the difficult balance facing policymakers. Companies reported continued cost pressures from higher energy prices and supply-chain disruptions related to the conflict, alongside existing domestic policy costs. At the same time, employment continued to decline at what Williamson described as a “worryingly high rate,” reflecting weak growth expectations and subdued demand. While lower energy prices have begun to ease some war-related inflation pressures, the broader outlook remains clouded by political uncertainty at home and geopolitical risks abroad. For now, the combination of stagnant growth, elevated costs, and weakening labor demand points to an economy struggling to regain traction.

Full UK PMI flash release here.