The UK service sector fell to its lowest level in six months as business conditions remained subdued.
The S&P Global/CIPS services PMI was 51.5 in July, down from 53.7 in June and the lowest in the current phase of expansion that began in February.
Tim Moore, economics director at S&P Global Market Intelligence, said: "The loss of momentum signalled by service providers in July suggests that the UK economy is set to flatline at best in the coming months as higher borrowing costs take a bigger toll on consumer spending and business confidence.”
“Service sector companies saw the weakest rise in new work for six months, while job creation slipped as some firms responded to softer market conditions by putting the brakes on hiring,” he noted.
The report showed firms experienced another period of subdued business conditions during July, with activity levels and new work expanding at much slower rates than in the previous month.
Gabriella Dickens at Pantheon Macroeconomics thinks the recovery in the services sector "appears to be running out of steam, strengthening the case for the MPC to announce a mere 25bp increase in Bank Rate later today."
The headline composite PMI now is consistent with zero quarter-on-quarter GDP growth in Q3, giving the MPC good grounds for revising down its forecast for growth today from the 0.5% figure in May’s Monetary Policy Report."
She anticipates Bank Rate rising to 5.25% today, from 5.00%, and then being increased for the last time in this cycle to 5.50% in September.