UK business activity cools as inflation pressure builds, September PMI shows

Growth in British business activity cooled this month while inflation pressure built, according to flash PMI data released on Wednesday — an awkward backdrop for finance minister John Healey ahead of his first budget next month.

The S&P Global UK Services Purchasing Managers’ Index fell to 51.7 in September from 52.5 in August, a three-month low, below the 52.0 reading economists had forecast in a Reuters poll.

Prices charged by services companies rose at the fastest pace in four months, amid accelerating cost pressures after an energy price rise stemming from the escalating war in Iran. S&P Global said the survey pointed to quarterly economic growth of around 0.1%, down from 0.4% in the second quarter.

“September is seeing a worrying combination of disappointingly sluggish economic growth and intensifying inflationary pressures, with subdued business confidence and high costs meanwhile continuing to discourage hiring,” said S&P Global’s chief business economist Chris Williamson.

Manufacturing offered brighter news: the flash manufacturing PMI rose to 52.0 from 51.7, helped by rising domestic orders, with optimism at a seven-month high — a day after the CBI’s gauge of orders hit a more-than-three-year high. The composite PMI, combining both surveys, fell to 51.7 from 52.5.

Markets on Tuesday pointed to about a 60% chance that the Bank of England raises interest rates on 5 November, the week after Healey delivers his October budget.

Sources

• Reuters: UK business activity cools as inflation pressure ramps up, PMI shows — opened in full; all figures and quotes verified against the page text
• InvestingLive: UK September flash PMI data — corroboration of headline figures (services 51.7 vs 52.0 expected, prior 52.5; manufacturing 52.0 vs 51.5 expected, prior 51.7; composite 51.7, prior 52.5) and Chris Williamson quotes, sourced to S&P Global Market Intelligence