UK PMI Services was finalized at 49.5 in August, down from July’s 51.5, and represents the lowest level since January. Furthermore, PMI Composite was finalized at 48.6, down from 50.8 in July, indicating the first contraction since the start of the year.
Tim Moore, Economics Director at S&P Global Market Intelligence, elaborated on the concerning developments. He noted that service sector businesses are “clearly feeling the impact of rising interest rates on client demand”
“Worries about the broader business climate also dampened spending in August,” Moore said, adding that “faltering UK economic growth and sticky inflation” are contributing to more cautious outlook.
A key takeaway from the survey is the pace at which backlogs of work are decreasing—reported as the fastest in over three years. This suggests that businesses are scaling back their operations, perhaps in anticipation of tougher times ahead. The survey also highlighted cooling job market within service sector, as job creation dipped to its lowest point since March.
The report pointed out that competitive pressures may have started to curb inflation within the service economy. The latest round of price hikes was the slowest seen in two years, offering a glimmer of hope that inflation may stabilize or even decline in the near term.
