The Markit/Chartered Institute of Purchasing & Supply UK Services Purchasing Managers’ Index (PMI) fell to 50.6 points in September. This is the weakest reading in almost two years.
Although the PMI remained above the 50-point mark that indicates expansion, the reading was down from the 52.2 points recorded in September and demonstrated the slowest rate of growth for the current 22-month run of rising activity.
Markit economist Andrew Harker said: “The latest UK services PMI data provide a warning to those who saw the strong growth in GDP during Q3 as symbolising the start of a strong and speedy economic recovery.
“With activity rising at the weakest pace in close to two years, the broadly stagnant trend seen in official data over the year to date looks to have continued at the start of the fourth quarter.”
Last month, a preliminary estimate by the Office for National Statistics said UK GDP grew by a better-than-expected 1% in the third quarter, driven by a 1.3% jump in service sector output.
Temporary factors such as the reversal of the ‘Olympic effect’ and the second quarter’s bank holidays aided the quarter-on-quarter expansion.
Aside from the headline activity reading, other indicators in the PMI weakened during October. New business growth, while remaining in expansion territory, slowed over the month, backlogs of work were depleted at a faster pace and business expectations fell to their lowest in four months.
IHS Global Insight chief UK and European economist Howard Archer said: “The October services purchasing managers’ survey is disappointing, and fuels concern that the economy is struggling to develop even modest underlying growth despite the better-than-expected rebound in GDP in the third quarter.”
