The tempo of financial progress within the UK slowed in September, as issues concerning the authorities’s upcoming funds weighed on enterprise exercise, based on a preliminary estimate from the broadly tracked PMI (Buying Managers’ Index).
The UK PMI “flash” composite output index, which measures enterprise exercise in each the providers and manufacturing sectors, slipped to 52.9 in September from 53.8 in August, falling in need of the consensus forecast of 53.5. Though the determine stays above the 50-point threshold, indicating continued progress, it displays a deceleration within the tempo of restoration.
The PMI, compiled by S&P International from a survey of 1,300 companies, highlighted that companies are more and more adopting a “wait and see” method within the lead-up to Chancellor Rachel Reeves’ funds announcement on October 30. Some firms have paused funding and recruitment choices till fiscal insurance policies are clarified.
Chris Williamson, chief economist at S&P International Market Intelligence, famous that whereas enterprise optimism had risen, uncertainty concerning the funds was “jangling nerves,” significantly within the manufacturing sector. “Investment plans have been put on hold, and hiring has slowed as businesses await clarity on government policies, especially taxation,” he mentioned.
Each providers and manufacturing sectors skilled a slower tempo of progress than in August, with new enterprise tempered by fragile consumer confidence and a discount in stock ranges. Nevertheless, Williamson was optimistic, stating that the information instructed a “soft landing” for the UK economic system and that inflation pressures seemed to be easing with out triggering a downturn.
Whereas prices confronted by companies rose in September, breaking a 45-month low recorded in August, the speed at which firms raised costs was the slowest since February 2021, hinting that inflationary pressures could also be below management.
Regardless of the slowdown, Alex Kerr from Capital Economics mentioned the dip within the PMI was not indicative of a looming downturn. He expects the Financial institution of England to make yet one more lower to the bottom charge this 12 months, following the discount from 5.25% to five% in August, with additional cuts anticipated in 2024.
The ultimate PMI report, primarily based on extra full knowledge, might revise these preliminary estimates.
