UK’s gradual development and rising inflation provides BoE headache – PMIs By Reuters

By Andy Bruce

LONDON (Reuters) – Britain’s economic system misplaced extra momentum this month as companies grappled once more with rising prices, a survey confirmed, highlighting the tough backdrop for Financial institution of England officers forward of Thursday’s rate of interest choice.

The preliminary “flash” IHS Markit/CIPS flash Composite Buying Managers’ Index dropped for a fourth consecutive month in September to its lowest studying since February, slipping to 54.1 from 54.8 in August.

A Reuters ballot of economists had pointed to a studying of 54.5. The survey confirmed a slowdown in each the companies and manufacturing sectors.

The readings, which may have been seen by BoE officers prematurely of the central financial institution’s 1100 GMT coverage announcement, add to indicators of fading momentum within the economic system simply as inflation surges, fuelled by world provide chain issues and rising power costs.

“The September PMI knowledge will add to worries that the UK economic system is heading in the direction of a bout of ‘stagflation’,” stated Chris Williamson, chief enterprise economist at IHS Markit, which compiles the PMI knowledge.

“Whereas there are clear indicators that demand is cooling since peaking within the second quarter, the survey additionally factors to enterprise exercise being more and more constrained by shortages of supplies and labour, most notably within the manufacturing sector but in addition in some companies companies.”

The PMI for the companies sector fell to 54.6 in September from 55.0 in August, its lowest degree since February when Britain was nonetheless in lockdown.

Enterprise expectations amongst companies firms fell to a nine-month low and so they raised costs on the broadest foundation since data began within the mid-Nineteen Nineties.

“Brexit was typically cited as having exacerbated world pandemic-related provide and labour market constraints, in addition to typically being blamed on misplaced export gross sales,” Williamson stated.

Whereas the BoE has stated it expects the present rise in inflation to be transitory, the rise has put rate-setters below extra strain to clarify how they plan to unwind the stimulus launched final yr to assist the economic system via the COVID-19 pandemic.

The PMI for the manufacturing sector fell to 56.3 in September from 60.3 in August, additionally marking its lowest degree since February.