The tempo of financial development within the UK slowed in September, as issues in regards to the authorities’s upcoming finances weighed on enterprise exercise, in accordance with a preliminary estimate from the extensively 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 development, it displays a deceleration within the tempo of restoration.
The PMI, compiled by S&P World from a survey of 1,300 corporations, highlighted that companies are more and more adopting a “wait and see” strategy within the lead-up to Chancellor Rachel Reeves’ finances announcement on October 30. Some corporations have paused funding and recruitment selections till fiscal insurance policies are clarified.
Chris Williamson, chief economist at S&P World Market Intelligence, famous that whereas enterprise optimism had risen, uncertainty in regards to the finances was “jangling nerves,” significantly within the manufacturing sector. “Funding plans have been placed on maintain, and hiring has slowed as companies await readability on authorities insurance policies, particularly taxation,” he mentioned.
Each providers and manufacturing sectors skilled a slower tempo of development than in August, with new enterprise tempered by fragile consumer confidence and a discount in stock ranges. Nevertheless, Williamson was optimistic, stating that the info steered a “mushy touchdown” for the UK financial 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 corporations raised costs was the slowest since February 2021, hinting that inflationary pressures could also be underneath 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 another minimize to the bottom price 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 information, could revise these preliminary estimates.