UK economy falters, yet there is still a lot of pressure on prices.

A poll released a day after the Bank of England abruptly hiked interest rates and said that it was prepared to take more action to prevent price increases revealed that while Britain's economy showed signs of slowing this month, inflation pressures remained strong.

Preliminary data released on Friday revealed that S&P Global's PMI, which measures firms in the manufacturing and service sectors, fell to a three-month low of 52.8 in June from 54.0 in May due to weaker-than-expected growth in new orders as manufacturers struggled.

The study, according to Chris Williamson, chief business economist at S&P Global Market Intelligence, indicated that the economy had lost momentum following a brief growth spike in the spring and was destined to decline even more in the months to come.

According to the 'flash' or preliminary survey, manufacturing shrank more than expected and services increased at the weakest rate in three months in Britain.

The fastest hiring increase since September of last year was one exception to the slowdown, driving up wages and adding to the inflation pressures in the service sector, which are of particular concern to the BoE.

As part of its efforts to combat inflation, which remained at 8.7% in May, the BoE is anticipated to keep hiking borrowing prices.

But as collateral damage in the battle against inflation, Williamson noted, "such rate hikes will clearly add further to the likelihood of a recession later in the year, which is looking increasingly inevitable."

On Thursday, the BoE increased interest rates for the thirteenth consecutive time, bringing the Bank Rate from 0.1% at the end of 2021 to 5.0% today.

The PMI survey revealed that services businesses raised their pricing this month, but slightly less dramatically than in May. Manufacturers, on the other hand, reduced their pricing for the first time in more than seven years.

The level of confidence in future production dropped down to its lowest level since January as businesses in both the manufacturing and services sectors were a little less upbeat about their prospects over the coming 12 months.

(Sources: investing.com, reuters.com)