Morgan Stanley economist Bruna Scalica said in a report that the UK’s July PMI data was lower than expected, indicating a recession in the manufacturing sector and a further slowdown in growth momentum in the services sector, but the softening component of inflation will encourage policymakers at the Bank of England.
Manufacturing output and new orders contracted further, while service sector activity is now just above the “unchanged” mark of 50.
She said the data also showed a more pronounced fall in service prices, which, combined with a more-than-expected fall in inflation last week, made it more supportive for the Bank of England to raise rates by 25 basis points at its next meeting in August, rather than 50 basis points.
She added that the Bank of England is expected to raise interest rates by a final 25 basis points in September.
