The UK's services sector returned to growth in July, according to the latest S&P Global UK services PMI survey, which recorded a reading of 52.1, up from 48.8 in June. This marks the highest level since April and signals expansion, as any figure above 50 indicates growth.
Stronger than expected performance
The July reading exceeded economists' forecasts of 51.8. The uptick was driven by improved consumer demand and a slowdown in price inflation, providing a boost to overall business activity.
Tim Moore, economics director at S&P Global Market Intelligence, noted: "UK service providers moved back into growth mode during July as greater consumer spending and strong demand for technology services helped to boost overall business activity."
New work and market conditions
Firms reported a "general improvement" in market conditions, with new work picking up for the first time in five months. Some companies linked this to positive demand for technology services and a "tentative" recovery in consumer spending.
However, global economic uncertainty related to the Middle East conflict remained a drag on growth, according to surveyed firms.
Inflation and outlook
The data also showed a further slowdown in price inflation, with the rate dropping to its lowest since February, supported by easing fuel costs.
Matt Swannell, chief economic adviser to the Item Club, predicted the economy is still likely to "lose momentum in the second half of this year." He added: "Inflation has probably now passed its low point, with July's 13% rise in the energy price cap kickstarting a series of upward pressures. This will put pressure on real disposable income, which we expect to decline in the second half."
