The UK economy has lost momentum but inflationary pressures continue in the dominant services sector, according to fresh data.
Both the services sector and manufacturing components of the preliminary S&P Global/CIPS UK Purchasing Managers Index (PMI) for June came in below the consensus forecast.
The 'flash' services PMI for June printed at 53.7, down from 55.2 the month before and below the 54.8 average economist estimate.
The manufacturing PMI fell to 46.2 from 47.1, missing the expected 46.8 reading. Putting the two together, the composite PMI measure was 52.8, down from 54.0 and below the expected 53.6.
A PMI reading 50 indicates economic expansion, while those in the 40s and below points to recession. The final PMIs for June will be confirmed early next month.
Chris Williamson, economist at S&P Global Market Intelligence, said: “June's flash PMI survey indicates that the UK economy has lost momentum again after a brief growth spurt in the spring, and looks set to weaken further in the months ahead.
"Most notably, consumer spending on services, which was a core growth driver in the spring, is now showing signs of faltering as the reality of higher interest rates, the increased cost of living and gloom about the outlook sets in and overrides the brief boost to spending enjoyed from the pandemic tailwind.
"The manufacturing sector meanwhile continues to report recessionary conditions."
Inflation worries
The PMI data highlighted contrasting inflationary pressures in the manufacturing and service sectors, S&P found, which comes after the Bank of England yesterday confirmed that strong services sector inflation shown in the CPI figures earlier this week remains one of its main worries.
Surveyed service providers recorded further steep rises in average prices charged, with the rate of inflation slightly softer than in May and its lowest for 25 months but still steeper than at any other time since the summer of 2008.
Total input cost inflation across both sectors was the softest since February 2021, with prices charged inflation easing only slightly.
Manufacturing output charges declined fractionally, more than offset by a further sharp rise in prices charged by service sector companies.
Around 25% of service providers in the survey reported a rise in their output charges in June, while 4% noted a fall.
Strong wage pressures in the services sector remained the dominant factor leading to the rises in prices charged, noted Williamson, as jobs growth accelerated.
He said: "While falling backlogs of work suggest this hiring trend could also fade in the coming months as the economy weakens, for now it is generating higher wage growth, in turn feeding through to still-elevated inflation pressures in the service sector.
"As such, the survey’s price gauges point to consumer price inflation remaining well above the Bank of England's target into 2024, which will add to the case for further interest rate hikes."
So while the PMI survey shows the economy is cooling slightly as a result of higher interest rates, persistent service sector inflation "suggests the Bank of England will consider its fight against inflation as still a work in progress", Williamson added.