I have a confession. When a business survey lands, I skip the headline and go straight to the prices. The headline tells you how busy firms are. The prices section tells you what they are about to do to your bill. This month, the prices section was the story.
What the survey said
On Wednesday 23 September, S&P Global published its early reading of the UK purchasing managers’ index, the monthly survey of how businesses are doing. Anything above 50 means growth; anything below means shrinking. The services sector, which makes up most of the British economy, was 51.7, down from 52.5 in August and below the 52.0 economists expected. Manufacturing did slightly better than forecast at 52.0. Taken together, the composite reading slipped to 51.7.
So Britain is still growing, just a little more slowly. On its own, that would be a fairly dull Wednesday. The problem was underneath. According to FXStreet’s write-up of the release, services firms raised prices at the fastest pace in four months, and S&P Global’s chief business economist, Chris Williamson, pointed to the uncomfortable combination of sluggish growth, building inflation pressure, alongside weak business confidence.
The awkward middle
Slower growth usually argues for lower interest rates. Rising prices argue for higher ones. When you get both at once, a central bank has no easy door to walk through, and neither does anyone with a mortgage coming up for renewal.
The Bank of England held rates at 3.75 per cent last week, with three of its nine policymakers already voting for a rise. This survey did nothing to calm them. Commentators quickly stated: a November rise remains firmly in play, and the next decision lands on 5 November.
What the pound made of it
The currency market gave its own verdict within hours. That afternoon, the American version of the survey came in far stronger than expected, with US services growing at the fastest pace since the summer of 2021. The pound slid to its lowest level against the dollar since early July, dipping just under $1.325. For anyone planning a trip to New York or paying for anything priced in dollars, that is a small but real pay cut on your spending money.
How I read it
For anyone with a mortgage or a rent bill, interest rate news does not stay on the screen. It comes to sit at the kitchen table. It comes to sit at my kitchen table. This survey tells me the fight against inflation in Britain is not finished, even though the economy is losing a little energy. I explored why prices can keep climbing even as the headlines cheer in Why Life Still Costs More When Inflation Falls, and this month’s numbers are a fresh reminder of that gap.
So I am treating a November rise as a possibility rather than a surprise. That means I am not assuming the next few months will bring cheaper borrowing, and I am not making any decisions that only work if rates fall soon. My impatience would love a clean signal. The economy, as usual, has declined to provide one.
The takeaway
A survey reading of 51.7 will not make the evening news. But the detail inside it, an economy busy enough to keep going and stretched enough to keep raising prices, is exactly the kind of quiet data that ends up shaping mortgage offers, savings rates and the price of a holiday. Published on the S&P Global PMI site, the prices section is always worth the extra minute.
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