According to the final report from S&P Global/CIPS, the growth of activity in the services sector slowed sharply in July, reaching a 17-month low, which was due to high inflationary pressure and the cost-of-living squeeze. Meanwhile, confidence about the future remained at an historically subdued level.
UK Services PMI fell in July to 52.6 points from 54.3 points in July. Economists had expected the index to decline only to 53.3 points. However, the index remained above 50 points again (for the 17th consecutive month), which indicates an expansion of activity in the sector.
The growth rate of new orders improved slightly compared to June, but remained much weaker than those seen previously. While firms noted that underlying demand continued to grow amid a successful conversion of strong pipelines into contract wins, many service providers also noted that growing economic uncertainty and high inflation had limited customer budgets. Meanwhile, the number of backlogs of work has grown, but only slightly. This was partly due to another noticeable increase in the number of staff (this was the 17th monthly increase in a row). Growth primarily reflected a response to recent increases in new work and business activity requirements. Meanwhile, inflation did ease on the record levels seen in May and June. Moreover, the latest overall rise in average cost burdens was the least marked since December 2021.
Finally, confidence in the prospects remained relatively low. Overall, business optimism for the coming year has increased slightly since June, but was the second lowest since May 2020