Service sector activity better than expected but weakest since January

investmentweek.co.uk:

The figure was a significant upgrade from the earlier 'flash' estimate of 47.2 and beat analysts’ expectations.

The S&P Global/CIPS UK Services PMI Business Activity index fell from 49.5 in August, to 49.3 in September, its lowest since January 2023, and below the 50 threshold that marks neutral growth for the second month running.

However, this was a significant upgrade from the earlier «flash» estimate of 47.2 and beat analysts' expectations.

UK recession 'can still be avoided' as GDP grows 0.2% in Q2

Customers showed subdued demand and kept tighter reins on their non-essential spending, creating a «sustained downturn» in UK service sector output, the S&P survey found.

Job cutbacks were at their highest level since January 2021, during the height of the Covid-19 pandemic, as hiring budgets have been squeezed and voluntary leavers are not being replaced.

Service providers experienced a «renewed fall in employment» in part due to costs, and «sluggish» business conditions.

As a result, total new work decreased slightly during September, and export sales dropped for the first time since November 2022.

Weakest rise in UK private sector output for six months 'reignites recession worries'

John Glen, chief economist at Chartered Institute of Procurement & Supply (CIPS), said September signalled «a change in direction for the services sector».

After strong activity in the spring and a sustained summer of business, autumn brought lower rates of new orders and «the bright spots of job creation dimmed», he said.

Glen added: «The UK economy is still showing signs of strain, and the impact of interest rate rises are [still] having an effect. Consumers are concerned by the higher cost of living and expenses continuing to rise,