UK services sector growth eases, but economy still on a 'positive trajectory'

The closely watched S&P Global UK services PMI survey scored 52.4 in September, slowing from 53.7 in August

The UK's services sector saw a slowdown in growth last month as the post-election surge began to lose steam, according to new data.

The S&P Global UK services PMI survey, which closely monitors the sector, reported a score of 52.4 in September, down from 53.7 in August and slightly below economists' forecast of 52.8. However, the sector has remained above the 50.0 threshold for the 11th consecutive month, indicating continued growth.

Tim Moore, economics director at S&P Global Market Intelligence, said: "The September PMI surveys suggest that the UK economy is still on a positive trajectory, with improving order books accompanied by cooling inflationary pressures. UK service providers indicated a moderate expansion of activity in September, fuelled by resilient business and consumer spending."

Despite this, the post-election rebound lost some momentum as output, new work and employment all increased at the slowest pace for three months. Firms reported that business activity was "boosted by rising domestic demand", particularly in technology, real estate and leisure services.

New business volumes also continued to grow over the month, with the rate of growth close to the 14-month high reported in July. The new data reveals that some companies surveyed mentioned cautious decision-making from corporate clients and strain on household incomes.

Service providers observed that "policy uncertainty ahead of the autumn Budget on October 30 had encouraged a wait-and-see approach" regarding investment decisions by key clients.

The study also showed that in September, businesses experienced a rapid rise in operating costs, with higher wages being a contributory factor. However, it noted that inflation on prices charged to consumers slowed down to its lowest rate since February 2021, due to competitive pressures limiting the ability of firms to transfer increased costs to customers.