S&P Global PMI shows UK business activity cools as inflation rises

The UK economy is still technically growing, but it’s doing so with all the enthusiasm of someone dragging themselves to a Monday morning meeting. S&P Global’s flash Purchasing Managers’ Index data, released on September 23, painted a picture of an economy losing steam at exactly the wrong moment: just as inflation is picking back up.

The composite output index dropped to 51.7 in September from 52.5 in August, missing the 52.0 consensus forecast and hitting a three-month low. Anything above 50 still signals expansion, so the UK isn’t contracting. But the direction of travel is not what policymakers were hoping for.

The numbers behind the slowdown

Services, which make up the vast majority of UK economic output, drove the deceleration. The services PMI fell to 51.7, down from 52.5 the prior month and below analysts’ expectations of 52.0.

Manufacturing told a slightly different story. That sector’s PMI actually ticked up to 52.0 from 51.7, beating the 51.5 consensus. Stronger domestic orders gave factories a modest lift, partially offsetting the drag from services.

But even within manufacturing, the picture wasn’t uniformly positive. The output index slipped to 51.4, its lowest reading in six months. So while new orders improved, the actual pace of production cooled.

On the inflation side of the ledger, the data was less ambiguous and more concerning. Services firms raised their prices at the fastest clip in four months. Input price inflation across the private sector hit a three-month high, driven largely by escalating energy and fuel costs tied to the ongoing conflict in Iran.

S&P Global’s own GDP estimate based on the PMI readings points to quarterly growth of just 0.1% for the current period. That’s a sharp deceleration from the 0.4% expansion recorded in Q2 2026.

A worrying combination

Chris Williamson, chief business economist at S&P Global, didn’t mince words about what the data implies.

The data points to a “worrying combination” of sluggish economic growth and intensifying inflationary pressures.

Williamson noted that the twin pressures are already filtering through to hiring decisions and broader business confidence. Companies that are uncertain about both demand and costs tend to freeze recruitment, which can create a self-reinforcing loop of weaker activity.

Adding to the anxiety is the upcoming autumn budget from the UK government. Businesses appear to be holding back on investment and expansion until they have clarity on fiscal policy.