The UK services sector hit a three-month low in September, potentially signalling the end of the UK’s growth spurt. The survey, released by Markit and the Chartered Institute of Purchasing & Supply (CIPS), shows that the purchasing managers’ index (PMI) dropped from 59.7 in August to a six-month low of 58.1 in September.
The findings come a month after it was announced that CIPS’ PMI was at a 10-month high of 60.5, rising from 59.1 in July, representing the sharpest monthly increase within that period.
Any figure above 50 still indicates expansion, but for many the drop represents the slowing down of the UK’s burgeoning growth over the past 18 months, and will ease the pressure on banks to increase interest rates.
Chris Williamson, Markit’s chief economist, said: “September’s PMI survey suggests that the UK most likely enjoyed another spell of above-trend economic growth in the third quarter, but the recovery appears to be losing its legs.”
Similar recent surveys have also pointed to a slowing down of the UK and EU’s manufacturing sector.
“The slowdown is in line with Bank of England projections and, alongside record low pay growth, adds to the case for interest rates to remain on hold until next year, and at least until there are clear signs of wages and household incomes rising in real terms,” Williamson said.
However, employment growth in the services sector increased in September, which is a silver lining for those concerned that the sector’s expansion may have stifled.
Meanwhile, Rob Wood, chief UK economist at German bank Berenberg, said: “We are cautious about growth over the next six months. Eurozone growth has disappointed, geopolitical risks have risen this year, the forthcoming general election creates domestic political risks and the majority of the public expect rate hikes with the next 12 months.
“Any of those could slow UK growth a little in the near-term. We look for GBP growth to slow to 0.6% in the fourth quarter before picking up again through next year as many of the risks ease.”