UK Services Activity Shrinks Most In 8 Months

The UK service sector contracted the most since January largely due to subdued demand and cutbacks to non-essential spending among clients, final survey results published by S&P Global revealed on Wednesday.

The Chartered Institute of Procurement & Supply final services Purchasing Managers’ Index posted 49.3 in September, down from 49.5 in August. The score remained below the neutral 50.0 threshold for the second month in a row but it was above the flash reading of 47.2.

Respondents cited sluggish business conditions, risk aversion among clients and downward pressure on demand in the wake of rising borrowing costs as reasons for reduced business volumes.

Reflecting lower spending among domestic and overseas clients, total new work dropped fractionally. Backlogs of work dropped for the fourth straight month and at the second-fastest pace since February 2021.

Job shedding in the service sector was the steepest since the start of 2021. On the positive side, business activity expectations remained optimistic overall and rose to a three-month high.

Regarding price pressures, the survey showed a moderation in cost pressures. The rate of input price inflation eased for the third time in the past four months to the lowest since April 2021.

Average prices charged by service sector companies increased again in September, reflecting efforts to pass on higher operating expenses. However, output price inflation eased to the weakest in 29 months.

The overall private sector contracted again in September. The composite output index posted 48.5, which was down from 48.6 in August. The score signaled the fastest reduction in output since January. However, the index was higher than the flash estimate of 46.8.

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