The Purchasing Managers’ Index (PMI) by S&P Global suggested the UK’s private sector grew at the fastest pace in four months in August, despite concerns around rising inflation and business costs.

According to provisional PMI estimates, a boost in the services sector offset a slowdown in manufacturing in August, while readings suggest resilience in activity across the UK economy has contrasted with an extended wave of job losses.

The PMI survey coincides with Office for National Statistics data showing the unemployment rate from 4.4% to 4.9% since Labour took office in mid-2024 with job losses taking place over 23 consecutive months — the longest recorded streak since the PMI surveys started in 1996.

Data showed that the private sector PMI was 52.5, above the threshold of 50.0 that separates growth from contraction. It also beat last month’s score of 52.2, but manufacturers suffered slower growth as the sector’s reading dipped from 51.9 to 51.5.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The UK economy picked up a bit more pace in August, adding to signs that we should see solid economic growth of around 0.3% in the third quarter.

“The expansion is being helped by sunny weather and tech investment, though as expected we have seen some softening of growth in the manufacturing sector as precautionary stock building cools. This reflects easing concerns, for now, over the economic impact of the war in the Middle East. Businesses are feeling more upbeat than at any time since the war began. Job losses are also moderating.

“It’s clear, however, that the Middle East and concerns over domestic government policy continue to have a damaging effect. Most worryingly, cost pressures remain high, largely due to energy prices and supply disruption linked to the Middle East conflict alongside high staffing costs.

“The data suggest the Bank of England looks likely to keep a hawkish bias but will stay cautious, holding off any rate hikes until the growth and inflation trajectories become clearer.”