Service sector stumbles as demand falters, price pressures mount

(Sharecast News) - The UK's services sector faltered in January, a closely-watched survey showed on Wednesday, as costs mounted and nervous clients tightened belts. The S&P Global UK services PMI business activity index for January came in at 50.8 last month. Although still in positive territory, it was down on December's 51.1 and the joint-lowest print for 15 months. It was also below expectations of 51.2.

A reading below the neutral 50.0 benchmark suggests contraction, while one above it indicates growth.

The survey of around 650 service sector firms also showed a decline in new work, the first since October 2023.

Respondents pointed to cost cutting and heightened risk aversion among corporate clients, as well as investment plans being delayed.

Input price pressures also started to intensify, however, largely due to higher payroll costs, while the pace of job shedding accelerated to its sharpest for four years.

Tim Moore, economics director at S&P Global Market Intelligence, said the data highlighted the "challenging" business environment for service provides, with "stagflation conditions" appearing to take a firmer hold.

He continued: "A renewed downturn in new business volumes added to signs that the near-term UK economic outlook remains tilted to the downside.

"Business activity expectations for the year ahead weakened in response to subdued demand in January, with optimism now at its lowest since December 2022."

The panel was surveyed between 9 and 29 January.