UK Services Sector Loses Steam Amid Rising Price Pressures

The UK's services sector showed signs of cooling off in September, but this slowdown was accompanied by faster price increases, according to the S&P Global flash UK Services Purchasing Managers' Index (PMI). The index fell to 51.7 from 52.5 in August, which still indicates growth, but at a slower pace than previously seen. This mixed reading comes as finance minister John Healey prepares his first budget and the Bank of England weighs its next rate move.

The services sector is the largest part of the UK economy, and this latest PMI reading suggests it's losing steam. The survey provider said the index lines up with only about 0.1% quarterly growth, down from 0.4% in the second quarter. Despite this slowdown, services companies reported the price increases they charge rose at the fastest pace in four months.

S&P Global's Chris Williamson called it a 'worrying combo of softer activity and intensifying inflation,' with firms also sounding cautious on hiring. Add to this higher energy costs, and the Bank of England could feel pressure to keep policy tight even if growth is fading. This has led markets to price around a 60% chance of a rate hike at the November 5th meeting.