UK Private Sector Surges 19% in Nine Months, Boosting Rate Cut Bets

The UK private sector recently experienced a significant rebound, with activity rising at the fastest pace in nine months. This unexpected surge has helped to alleviate market concerns and fuel optimism. The improved performance in the private sector has led to increased bets on potential rate cuts, as market participants anticipate that the Bank of England may respond to the positive economic indicators by adjusting monetary policy.

S&P Global’s June PMI climbed to 52 from May’s 50.3, beating earlier estimates and signaling renewed business momentum. Services did most of the heavy lifting. Firms across travel, finance, and hospitality reported stronger demand. Clients returned. New orders picked up. Confidence, while not booming, is improving. After months of stagnation, this bounce felt different, less like a blip, more like a possible turning point.

The data brought relief on the inflation front, too. Companies also caught a break on input costs. Price increases continued to slow for a second straight month. Service providers pushed through the smallest hikes in more than four years. That matters. If costs stay low and demand holds, the Bank of England could finally consider rate cuts. Markets already expect one in August. A month ago, that looked like a stretch. Now, it seems almost reasonable. Growth isn’t roaring, but the economy feels less fragile. Inflation risks, for the moment, are losing steam.

The economic update landed during a moment of political calm. Prime Minister Keir Starmer reaffirmed support for Chancellor Rachel Reeves. That single statement helped settle investor anxiety after a tense start to the week. Yields dropped. Sterling stabilized. Confidence returned to the bond market quickly. Investors aren’t ignoring politics, but they’re willing to look past it when the economy sends clearer signals. For now, fundamentals have taken the wheel again.

This shift in tone isn’t just a win for bonds. It’s also getting attention from crypto traders and risk-on investors. If borrowing costs come down, liquidity improves. That can lift appetite for speculative assets. Crypto markets, in particular, respond fast to interest rate signals. A dovish Bank of England would mark a major sentiment shift, especially after months of policy tightening. For now, traders are watching central bank comments closely. The next move could ripple far beyond traditional finance.

Even with the strong headline reading, the recovery isn’t complete. Hiring slowed in June. Wage costs stayed high. Manufacturers continued to struggle, though their downturn has started to level out. Export demand weakened, another sign of global uncertainty weighing on UK business. Firms remain cautiously optimistic. But many aren’t ready to take big risks just yet. Cost-of-living worries haven’t gone away. For sectors tied to global trade or consumer sentiment, recovery still feels uneven. The private sector may be picking up, but it’s not racing ahead.

The data paints a more balanced picture. Growth is returning, inflation is cooling, and markets are responding. That puts the Bank of England in a better position than it’s had in months. Still, risks remain. Sticky wage inflation could delay action. So could further weakness in exports or geopolitical disruptions. But the mood has shifted. Investors are no longer asking if a rate cut will happen; they’re asking when. If July data shows more of the same, August could bring a real policy pivot.