October data pointed to a moderate increase in UK private sector output, but the rate of expansion slowed for the second month running to its lowest since November 2023. Survey respondents widely commented on the impact of delayed decision-making among customers and heightened economic uncertainty in October. Employment was a particular area of weakness, with overall headcount falling for the first time in 2024 so far. Private sector firms reported another strong rise in their average prices. In addition, the rate of price-driven inflation rose to a three-month high. Cost pressures eased again, with the latest rise in average input prices the slowest since November 2020.
At 51.7 in October, the seasonally adjusted UK PMI composite output index fell from 52.6 in September and was an 11-month low. UK private sector growth slides to 11-month low in October Key findings: UK Composite PMI(1) at 51.7 (September: 52.6). Lowest in 11 months.
The index pointed to only a modest rise in private sector output, with growth much slower than on average in Q3 2024. Service providers recorded a slightly faster pace of business expansion than manufacturers in October, but in every sector there was a loss of momentum since September.
Anecdotal evidence pointed to business uncertainty ahead of the Autumn Budget on 30 October and concerns among customers about the near-term outlook for domestic economic growth. A wait-and-see approach to key spending decisions acted as a constraint on new business entry during October. However, a further slowdown in input cost inflation to a four-year low opens the door for the Bank of England to take a more aggressive stance towards cutting interest rates
Backlogs of work fell again in October
Although still strong, the overall rate of new order growth slowed to its lowest since June. Resilient demand in the services economy contrasts with an outright decline in new business received by manufacturers. The latest data also pointed to mixed trends in export sales, with service providers reporting the fastest growth since March 2023 while goods producers reported the biggest drop in new work from abroad for eight months.
The UK Services Business Activity Index (2) at 51.8 (September: 52.4). An 11-month low. The UK Manufacturing Output Index (3) at 50.9 (September: 53.6). A 6-month low. The UK Manufacturing PMI (4) at 50.3 (September: 51.5). A 6-month low. The data was collected from October 10-22. Backlogs of work fell again in October, suggesting no pressure on business capacity. The volume of unfinished work has been falling over the past year and a half.
Excess capacity, cost pressures and general concerns about the business outlook all acted as a brake on staffing in October. Total private sector employment fell for the first time since December 2023, albeit only marginally. This was the sharpest decline in service sector workforce numbers for 13 months. The latest survey pointed to a strong increase in average cost burdens across the private sector economy, but inflation fell to a 47-month low. Survey respondents cited lower fuel costs and some instances of falling commodity prices. Where higher input costs were reported, Optimism has now declined for three consecutive months this mostly reflected higher payroll payments and higher prices paid for technology services.
The overall confidence score is the lowest since November 2023
Firms again sought to ease pressure on margins by increasing their average prices charged. The latest survey pointed to a strong rise in production costs, with inflation at its highest since July. At the same time, respondents indicated a decline in their expectations for business activity over the coming year.,
Press Release The overall confidence score was the lowest since November 2023. Weaker growth expectations were seen in both the manufacturing and services sectors in October, with the former indicating the least optimistic sentiment in nearly two years. Growth expectations were typically linked to planned business investment, hopes of a gradual improvement in economic conditions and upcoming new product launches. However, respondents also widely indicated that heightened political uncertainty at home and abroad had weighed on business confidence.
Business activity growth fell to its lowest level in nearly a year in October as government rhetoric and pre-budget uncertainty dampened business confidence and spending. Firms are awaiting clarity on government policy, with conflicts in the Middle East and Ukraine, as well as the US election, adding to tensions over the economic outlook.
“Preliminary PMI data suggests the economy expanded at a meager quarterly rate of 0.1% in October, reflecting a broad-based slowdown in business activity, spending and demand across both manufacturing and services. Worryingly, the deterioration in business confidence in the outlook also prompted firms to cut staff numbers for the first time this year. The policies announced in the Budget clearly have the potential to play a key role in steering the direction of the economy in the coming months.
