The UK private sector grew at the slowest pace in seven months in September as the shortage of materials and labor constrained business activity and pushed up inflationary pressures, flash survey data from IHS Markit showed on Thursday.
The Chartered Institute of Procurement & Supply composite output index fell to 54.1 from 54.8 in August. The score was also below economists’ forecast of 54.5.
Chris Williamson, chief business economist at IHS Markit, said “The September PMI data will add to worries that the UK economy is heading towards a bout of ‘stagflation’, with growth continuing to trend lower while prices surge ever higher.”
The survey underscored the challenge faced by the Bank of England to contain rising price pressures without choking off the weakening recovery, Bethany Beckett, an economist at Capital Economics, said. The Monetary Policy Committee is unlikely to rush to raise interest rates.
The factory Purchasing Managers’ Index fell more-than-expected to 56.3 from 60.3 a month ago, the survey showed. The expected score was 59.0.
The services PMI dropped to 54.6 in September, while it was expected to remain unchanged at 55.0.
Rates of expansion in both output and new orders were each the weakest in the respective seven-month sequences of growth. Nonetheless, firms continued to expand their staffing levels at a rapid pace, particularly in the service sector.
Despite ongoing rapid job creation and a slowdown in new order growth, backlogs of work continued to rise across the private sector, extending the current sequence of accumulation to seven months.
Rising wage costs, the effect of supply-chain disruption on raw material prices and increased transportation costs pushed up input prices. In response, companies raised their own selling prices at the strongest pace on record.
Business confidence eased to an eight-month low in September.
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