Growth looks set to slow in the UK economy, according to a closely watched survey, as businesses await the October budget with a degree of caution.
The latest ‘flash’ purchasing managers’ index (PMI) came in at 52.9, down from last month’s figure of 53.8 and comfortably below expectations. It was the lowest reading for two months.
Nevertheless, the figure was comfortably above the 50 no-change mark and extended the run of expansion to 11 consecutive months.
The survey showed slower growth in both the services and the manufacturing sector, though both remained in expansionary territory.
“Where higher levels of output were reported, survey respondents mostly commented on rising customer demand and improving domestic economic conditions. Meanwhile, fragile client confidence and ongoing inventory cutbacks were cited as headwinds to growth in September,” the survey said.
Despite the slowdown, Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey “should not be seen as too concerning”.
He noted the survey was consistent with GDP growing at a quarterly rate of 0.3 per cent, in line with the Bank of England’s August forecasts.
The economy survey revealed another robust month for new business, led by strengthening order books across the services sector.
Business confidence remained high thanks to the steadily improving economic outlook, although Williamson said the upcoming budget was “jangling nerves”.
“Investment plans in particular are reported to have been put on ice pending clarity on the new government’s policies, especially towards taxation. Hiring likewise has been stifled by business uncertainty about the near-term economic outlook ahead of the ‘budget’,” he said.
Clients were also reported to be taking a ‘wait-and-see’ approach to key decisions before the fiscal event.
The survey suggests that growth will slow in the second half of the year. The UK was the fastest-growing economy in the G7 in the first six months of the year, having suffered a shallow recession in 2023.