UK service sector activity contracts in September - IHS Markit

The latest IHS Markit / CIPS PMI data for the UK service sector signalled a contraction in activity in September, and the biggest cut in employment in over nine years. With both new and outstanding business declining at the end of the third quarter, companies were the least optimistic of future growth of activity since July 2016 following the EU referendum.

The seasonally adjusted UK Services PMI Business Activity Index fell to 49.5 in September, from 50.6 in August, signalling a decline in service sector output. Though indicative of only a marginal rate of reduction, it was only the fifth time in over a decade that the headline index has fallen below the no-change threshold of 50.0.

The overall reduction in service sector output reflected lower volumes of both new and outstanding business. New contracts fell for the sixth time in 2019 so far, albeit only marginally, while backlogs declined for the twelfth successive month and at the fastest rate since January. Firms reported that heightened uncertainty around Brexit had led to the postponement of orders by clients.

Business expectations weakened for the fourth month running in September, the most sustained slide in sentiment since the second half of 2015. The Future Activity Index remained above 50.0 but was the lowest since July 2016, and the second-lowest since March 2009.