LONDON (Reuters) – Britain’s services sector activity contracted in August for the first time since January as higher interest rates reduced consumer and business demand, although the decline was less significant than initially estimated, shows the monthly S&P Global survey of purchasing managers published on Tuesday.
The S&P Global/CIPS Purchasing Managers’ Index (PMI) for the UK services sector fell to 49.5 in August from 51.5 in July – a seven-month low, but above an initial estimate of 48.7.
The composite PMI, which also includes the manufacturing PMI, fell from 50.8 to 48.6, its lowest level since January, but was revised higher from an estimate of 47.9 for August. .
“Service providers saw customer spending reverse in August as higher borrowing costs, weak business confidence and household financial struggles reduced selling opportunities,” said Tuesday Tim Moore, chief economics officer of S&P Global.
Order books saw their biggest decline in more than three years, and companies responded by hiring staff at the slowest rate in five months.
When the initial estimate was released on August 23, S&P Global said it implied a 0.2% contraction in the UK economy in the third quarter.
Earlier today, Barclays reported slowing consumer spending growth in August, partly due, the bank said, to an unusually wet summer as well as a more general rise in the cost of living. .
“The extent to which the slowdown in employment and demand will be transmitted to inflation will be monitored over the coming months,” said Tim Moore.
Inflation was 6.8% in July, and financial markets expect the Bank of England to raise interest rates this month from 5.25% to 5.5%, the 15th consecutive increase, before a peak of 5.75% this year.
The PMI showed that services companies raised prices in August at an admittedly rapid pace by historical standards, but the slowest in two years, with costs rising at the lowest pace since May 2021.
Salaries and energy bills were the main sources of cost increases, with some companies citing lower raw material costs.
(David Milliken, Corentin Chapron, edited by Blandine Hénault)
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