The United Kingdom’s economic indicators sent mixed signals in June, with the services sector unexpectedly stabilizing while broader private business activity slipped into contraction for the first time in months. The S&P Global Services Purchasing Managers’ Index (PMI) came in at 48.8, marginally above the forecast of 48.7. Although still below the 50.0 threshold that separates expansion from contraction, the beat suggests the dominant services sector — which accounts for roughly 80% of UK GDP — may be finding a floor.
However, the more comprehensive S&P Global Composite PMI, which combines services and manufacturing, registered 49.3, just short of the expected 49.4 and marking a move into contraction territory. This decline was driven by persistent weakness in manufacturing alongside a softening in services demand, raising concerns that the economy is losing momentum amid high inflation and elevated interest rates.
For the Bank of England, the mixed data complicates the policy outlook. The services beat offers some hope of avoiding a deep recession, but the composite contraction heightens the risk of a technical recession. Market reaction included slight weakness in the British pound and lower bond yields, as traders priced a higher probability of a rate cut later this year. However, the central bank’s primary focus remains on returning inflation to the 2% target, meaning it is unlikely to alter its stance purely on a single PMI reading.
