A business survey released on Wednesday revealed that the decline experienced by British services companies in September was less severe than initially anticipated due to an unexpected drop in pricing and the National Bank of England’s decision to maintain interest rates at their current levels.
The S&P Global UK Service Purchasing Manager’ Index (PMI) final reading decreased in September from 49.5 to 49.3, further undercutting the 50-point growth threshold.
Although it represented an eight-month low, it was significantly better than the initial “flash” estimate of 47.2 that alarmed investors and might have influenced Bank of England authorities, who narrowly decided to keep the rate of interest on hold last month despite a small majority voting against it.
The final PMI incorporated feedback from businesses questioned between September 20 and September 27 – days after statistics revealed that British inflation unexpectedly declined in August and the BoE’s unexpected rate decision on September 21.
The services sector is still on a downward trajectory, according to Tim Moore, economic director at data provider S and P Global Market Intelligence, who also highlighted that some businesses were growing more confident about easing price pressures.
“Positive sentiment was explained by hopes of a prolonged easing of inflationary trends and an improvement in consumer demand, as well as the introduction of new products and company investment plans,” Moore stated.
“Worries about increased borrowing costs or stretched budgets for families were nevertheless cited by surveyed respondents.”
The offerings The PMI’s employment indicator hit its lowest point since January 2021. It was the smallest reading since 2010 and the lowest level since the COVID-19 pandemic.
According to Moore, there is evidence that some businesses decided not to hire replacements for departed employees due to intense wage pressure.
Cost pressure and selling price indicators from the PMI fell to their lowest point since April 2021.
The composite PMI, which combines the manufacturing survey from Monday with the services PMI, fell from 48.6 in August, which had been pushed up from an unexpected reading of 46.8, to 48.5 in September.