Activity across the UK’s private sector grew at a slower rate in September as inflationary pressures eased across parts of the economy, according to indicative new data.
The S&P Global flash UK composite purchasing managers’ index (PMI) reported a reading of 52.9 in September, down from 53.8 in August.
It came in ahead of expectations of economists, who had pencilled in a reading of 52.2 for the latest survey.
The flash figures are based on preliminary data. Any score below 50 indicates that activity is contracting while any score above means it is growing.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said the figures showed “robust economic growth being accompanied by a cooling of inflationary pressures”.
He said: “The data therefore hint at a ‘soft landing’ for the UK economy, whereby the fight against inflation is showing increasing signs of being won without higher interest rates having caused a downturn.”
Investment plans in particular are reported to have been put on ice pending clarity on the new Government’s policies, especially towards taxation
Chris Williamson, S&P Global Market Intelligence
Last week, the Bank of England opted to maintain the base interest rate at 5%, with policymakers urging caution against easing monetary policy too quickly until it could be certain that inflationary pressures had been “squeezed out of the system” entirely.
Monday’s PMI data indicated that price inflation eased to a 42-month low across the private sector, driven by a weaker rise in prices charged by companies in the services sector.
However, the overall rate of input price inflation has picked up since August, driven by higher wages and shipping costs.
Meanwhile, companies reported robust business gains for the month, with the services sector again leading the way with strengthening order books.
Respondents noted improving sales pipelines alongside successful marketing and promotional initiatives, with the technology services sub-sector particularly upbeat about demand conditions.
Nonetheless, in both the manufacturing and service sectors there were some reports of clients adopting a wait-and-see approach to decision-making ahead of the autumn Budget.
Chancellor Rachel Reeves has so far struck a gloomy tone ahead of the October Budget, warning of “tough decisions” across the economy.
Mr Williamson continued: “Business optimism has also risen, albeit with concerns about the impact of the autumn statement jangling nerves somewhat, notably in the manufacturing sector.
“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.”
Rhys Herbert, senior economist at Lloyds Bank, said: “Despite today’s decline, the economy is seeing signs of strengthening as businesses remain cautiously optimistic.
“Strong performance continues in manufacturing and services, and with inflationary pressures easing, businesses will be hoping to take advantage of improved economic conditions in the months ahead.”