UK PMIs: Economy "riding wave of unexpected vigour" but may be temporary "sugar rush"

Britain’s economy is riding a wave of unexpected vigour, at least according to this morning’s PMI figures, which suggest that growth in business activity leapt to a one-year high in August. While the UK’s manufacturing sector continues to struggle, battered by rising costs and sluggish external demand, the dominant services industry, the undisputed powerhouse of Britain’s economy, appears to be forging ahead nicely.  

We are very sceptical that this solid performance will last. A hotter than usual summer is likely to be buoying the services sector, notably helping to prop up retail, tourism and hospitality activity. This will likely prove to be no more than a temporary sugar rush, however, rather than a sustained boom. We expect growth to moderate during the rest of the year, with rising labour costs, high inflation and acute fiscal policy uncertainty set to trigger a tightening of the belts among business owners and consumers alike in the coming months.”