The flash reading of the UK services sector purchasing managers' index compiled by S&P Global came in at 51.7 in September, down from 52.5 in August and the lowest level in three months. Economists polled by Reuters had expected 52.0. Prices charged to customers by services firms, the backbone of the UK economy, rose at their fastest pace in four months, while cost pressures intensified on higher energy prices stemming from the war in Iran. S&P Global said the survey results pointed to economic growth of about 0.1% in the third quarter, below the 0.4% recorded in the second quarter. Chief Business Economist Chris Williamson said September presented a worrying combination of disappointingly sluggish growth and strengthening inflationary pressures, adding that the rise in the prices index suggested the Bank of England may keep a hawkish stance, while weak growth in business activity highlighted the risk from higher borrowing costs. As of the 22nd, financial markets were pricing in roughly a 60% chance that the Bank of England raises interest rates on November 5, the week after Finance Minister Healey presents the budget. The manufacturing PMI rose to 52.0 from 51.7 in August, supported by an increase in domestic orders, with optimism about the outlook at a seven-month high. The composite PMI covering both manufacturing and services stood at 51.7, down from 52.5 in August.
Hotter UK services price pressures and ~60% odds of a BoE November rate hike strengthen the pound versus the dollar.
