Economic Buzz: UK service sector growth eases to a five-month low

At 50.8 in September, the seasonally adjusted S&P Global UK Services PMI Business Activity Index eased considerably from August's 16-month high (54.2). The headline index has posted above the neutral 50.0 threshold in each month since May, but the latest reading was the weakest over this period and indicated only a modest rise in activity.

UK service providers achieved a marginal expansion of business activity in September. However, the rate of growth eased sharply since August amid sluggish demand conditions. Weak sales pipelines and pressure on margins from sharply rising staff costs contributed to another marked decline in service sector employment. Lower staffing numbers have been recorded throughout the past 12 months.

Some firms noted that a tentative upturn in workloads has boosted output, while others cited the impact of investments in new product development and long-term expansion plans.

Incoming new work increased only slightly during September and at a much slower rate than in the previous month. Export sales meanwhile reversed course in September, having expanded at the fastest rate for 10 months in August.

Backlogs of work were depleted in September, with the rate of decline accelerating to its fastest since May. Business activity expectations were upbeat overall in September, with 46% of companies forecasting growth during the year ahead and only14% predicting a decline.

At 50.1, down from 53.5 in August, the seasonally adjusted S&P Global UK PMI Composite Output Index dropped to its lowest level for five months and signalled broadly unchanged volumes of business activity across the private sector economy.

Service sector activity increased marginally in September, but manufacturing production fell to the greatest extent for six months. Total new work returned to contraction in September, following modest growth in August.

This was driven by a sharp decline in manufacturing order books. Private sector payroll numbers fell for the twelfth month running and at a solid pace. Lower employment was recorded in both the manufacturing and service sectors, reflecting subdued demand and efforts to mitigate rising costs.

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