By David Milliken
LONDON (Reuters) – Britain’s services businesses suffered a loss of momentum for a third month in a row in October, adding to signs the economy is making a weak finish to 2023 as high interest rates and cost of living pressures weigh on demand.
The S&P Global/CIPS services Purchasing Managers’ Index (PMI) edged up to 49.5 in October from September’s eight-month low of 49.3, remaining below the 50 level that divides growth from contraction for a third consecutive month.
October’s final reading was slightly higher than a preliminary or “flash” reading of 49.2 released last week.
The composite PMI – which includes weak data from the smaller manufacturing sector released on Tuesday – rose to 48.7 from 48.5 in September.
“Forward-looking survey indicators suggested that service providers will continue to skirt with recession,” Tim Moore, economics director at S&P Global, said.
“A shallow downturn in UK service sector activity persisted in October as businesses struggled to make headway against a backdrop of worsening domestic economic conditions and stretched household budgets.”
New orders fell at their fastest pace this year, reflecting weak domestic demand, although overseas orders from the United States and the Middle East were strong.
The Bank of England kept interest rates at a 15-year high of 5.25% on Thursday and pushed back against suggestions that it would cut rates any time soon, despite forecasting zero growth in 2024, down from its expectations three months ago.
British consumer price inflation of 6.7% in September was the highest of any major advanced economy, although the BoE predicted it would drop to 4.8% in October.
The services PMI showed the weakest rise in businesses’ input costs since February 2021, as falling raw material costs and discounting by suppliers offset continued upward pressure from rising wage bills and fuel costs.
Prices charged by services companies rose by the most in three months, although the increases were smaller than in the first half of the year.
(Reporting by David Milliken; Editing by Susan Fenton)
