As interest rates rise later this year, the UK economy will expand at its slowest pace since it emerged from the 2021 lockdown, according to the latest private sector activity snapshot.

Both the UK services and manufacturing sectors struggled to cope with rising cost of living pressures despite slightly outperforming the eurozone and US.

After the pandemic began in May 2020, industry was squeezed by higher commodity prices, resulting in the first contraction of manufacturing output since then.

Despite signs of global price pressures easing, inflation in the UK reached 9.4%, its highest level in forty years.

The input price level for the second consecutive month reached the lowest level since September 2021.

A majority of companies said intense wage pressures resulting from staff shortages and rising consumer prices had continued to raise their costs in spite of lower commodity prices, especially metals.

Despite this, analysts said a turning point had been reached. The Bank of England will be cheered by news of easing cost pressures, said UK economist Samuel Tombs of Pantheon Macro.

In response to the S&P/CIPS purchasing managers' index, Threadneedle Street is likely to tighten policy at a time when the economy is at its most vulnerable in 17 months.

This resulted in more work being outsourced in June than in July, and the composite output index fell from 53.7 in June to 52.8 in July.

It appears that when the reading falls below 50 there is contraction rather than expansion taking place.

Increasing interest rates will cause demand growth to weaken further in the coming months, as the Bank of England attempts to control inflation.

It is unprecedented for the Fed to raise interest rates at a time of such weak business growth over the past quarter century," he said.

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