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UK services sector growth slowed in September

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Business activity slowed slightly in September, according to a closely followed measure of services sector activity.

The UK services purchasing managers’ index (PMI) hit 53.9 points in September, compared to 54.3 in August, according to figures released today from data firm IHS Markit and the Chartered Institute of Procurement and Supply, staying well above the 50-point mark which denotes an overall expansion in output.

The reading remained fractionally higher than the average for 2018, of 53.6 points, with a "solid increase" in new work as well as "competitive pricing strategies".

More work and competitive pricing helped push services sector activity higher for the month, though the index noted that Brexit concerns and heightened political uncertainty are constraining growth and had contributed to tighter budgets among clients.

The PMI data shows that the services sector has expanded steadily since early 2013, although with some choppy performance in recent months.

Thomas Pugh, UK economist at Capital Economics, said that "a bit of a fall" was to be expected after a strong performance in the previous month. "The bigger picture is that growth in the services sector is holding up pretty well," he said.

The rate of job creation in the services sector hit its strongest since February, with more anecdotal evidence that firms had trouble filling vacancies and had started to raise salaries, in a sign which will be welcomed by the Bank of England. The Bank's economists expect the tight labour market to trigger higher pay packets.

The higher salaries were reflected in increased costs reported by businesses in the survey, with input price inflation hitting its highest in three months, and "well above the low seen in February", IHS Markit said.

Chris Williamson, chief business economist at IHS Markit, said the data across services, construction and manufacturing, all published this week, suggest that GDP rose by slightly under 0.4 per cent in the third quarter, in line with consensus expectations.