UK companies grow at their weakest level in six months due to rate hikes.

According to a poll released earlier, the private sector in Britain is expanding at its slowest rate in six months in July as company orders remain unchanged in the face of higher interest rates and persistently high inflation.

The PMI saw its worst month-over-month decline in 11 months with a preliminary reading of 50.7, down from 52.8 in June.

Even though it was above the 50-point dividing expansion from contraction, it was the lowest reading since January. The reduction was significantly larger than any analyst had predicted in a Reuters survey, which had predicted a dip to 52.4.

The study confirmed the weak picture for the British economy, which has so far resisted predictions of a recession in 2023 but has not yet fully reaped the benefits of 13 consecutive hikes in interest rates by the Bank of England.

Similar to Britain, the earlier on Monday reported Eurozone PMI data came in significantly below experts' estimates and, unlike Britain, indicated a clear decline in activity.

The Bank of England boosted interest rates last month from 4.5% to 5%, and the financial markets anticipate another increase to 5.25% next week. At 7.9% in June, British inflation was the highest among developed nations.

As investors reduced their estimates for how high the BoE will hike rates in response to Monday's report, sterling and British government bond yields declined.

Although rates are still expected to climb to 5.25% or maybe 5.5% next week, markets now expect rates to peak at 5.75% late next year, down from earlier this month's estimates that they would hit 6.5%.

Manufacturing, which makes up roughly 10% of the nation's economic output, suffered the most from the lack of momentum, according to S&P, as the PMI fell to 45.0 from 46.5, its lowest level since May 2020.

Businesses claimed that instead of making fresh orders, customers used up the extra stock that was already on hand.

The PMI indicated the lowest increases in companies' input and production costs since February 2021, indicating lessening inflation pressures but also "further, potentially marked, falls in consumer price inflation in the months ahead," according to Chris Williamson, chief business economist at S&P Global.

Wages continued to be a significant driver of cost growth, somewhat offsetting decreases in the price of energy, goods, and metals.

(Sources: investing.com, reuters.com)