Rachel Reeves’s claims about Labour’s dire economic inheritance were delivered another blow yesterday with figures showing Britain’s private sector is growing at the fastest pace in four months.
The figures pointed to robust economic growth, fading inflation pressures and the best pace of employment growth for more than a year.
That helped the pound rise to more than $1.31 against the US dollar, its highest since July last year, in a boost to holidaymakers – also climbing by about half a cent against the euro to nearly €1.18.
Meanwhile a Treasury-compiled snapshot of independent economic forecasts showed that experts are becoming increasingly optimistic about the outlook for this year.
On average they now think the UK will grow by 1.1 per cent in 2024, up from 0.4 per cent at the start of this year.
It flies in the face of the new government’s claim that the legacy left to them by the Tories is the worst since the Second World War. The claim has been treated with disdain by many in the City.
Last week, official data showed that the economy grew faster than any other G7 economy in the first half of the year while inflation remains close to the Bank of England’s 2 per cent target and unemployment is falling.
Yesterday’s figures from the closely-watched purchasing managers’ index (PMI) compiled by S&P Global showed growth continuing over the summer.
The index rose to 53.4 – on a scale where anything above the 50-mark represents growth.
That was better than expected, and up from 52.8 in July. It was the strongest reading since April.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: ‘August is witnessing a welcome combination of stronger economic growth, improved job creation and lower inflation.’
At the same time, the survey suggested that price pressures are easing – something that may give the Bank of England more leeway to cut interest rates.
The UK PMI reading was stronger than the eurozone, where it picked up to only 51.2 despite receiving a temporary boost from the Olympics on France.
Germany, Europe’s biggest economy, slowed further with a reading of 49.1 – a five-month low – suggesting that it is shrinking.
Kallum Pickering, chief economist at broker Peel Hunt, said the figures ‘continue to point to the UK as a relative bright spot among major European economies amid continued weakness in the eurozone’.
However, experts said they did not expect to see the UK’s quarterly gross domestic product (GDP) growth maintain the strong pace it has seen in the first half of this year, when Britain enjoyed ‘gangbusters’ expansion of 0.7 per cent in the first quarter and 0.6 per cent in the second quarter.