The UK services sector grew in July at the slowest pace since February 2021 as inflationary pressures dampened demand, according to a survey released on Wednesday.
The S&P Global /CIPS UK services purchasing managers’ index fell to 52.6 in July from 54.3 in June, coming in below the preliminary estimate of 53.3. This was the weakest service sector performance since February 2021.
The composite PMI output index – which covers the services and manufacturing sectors – fell to 52.1 from 53.7. This also marked the slowest rate of expansion since February last year and was below the flash estimate of 52.8.
Tim Moore, economics director at S&P Global Market Intelligence, said: “UK service providers reported their worst month for business activity expansion since the national lockdown in February 2021. Reduced levels of discretionary consumer spending and efforts by businesses to contain expenses due to escalating inflation have combined to squeeze demand across the service economy. The near-term outlook also looks subdued, as new order growth held close to June’s 16-month low and business optimism was the second-weakest since May 2020.
“The most encouraging development during July was a considerable slowdown in input cost inflation since the previous month, likely reflecting lower commodity prices and a gradual easing of global supply shortages. Overall cost burdens rose to the smallest extent seen so far in 2022, despite widespread reports citing pressure on operating expenses from higher fuel bills and staff wages.
“Any slowdown in inflationary pressures can’t come soon enough for service providers, with many firms reporting growing customer resistance to price hikes and a subsequent downturn in demand as higher energy, fuel and staff costs are passed on to customers.”