LONDON, Sept 23 Reuters - The British economy lost more momentum this month as businesses grappled with rising costs, a survey showed highlighting the difficult backdrop for Bank of England officials ahead of Thursday's interest rate decision.
The preliminary flash IHS Markit CIPS flash Composite Purchasing Managers' Index dropped in September for a fourth consecutive month to the lowest reading since February, dropping from 54.1 to 54.8 in August.
A Reuters poll of economists had shown a reading of 54.5. The survey showed a slowdown in manufacturing and services sectors.
The readings, which will have been seen by BoE officials in advance of the central bank's 1100 GMT policy announcement add to signs of fading momentum in the economy just as inflation surges, fuelled by global supply chain problems and rising energy prices.
The September PMI data will add to fears that the UK economy could become a catastrophe-prone economy, says Chris Williamson, chief business economist at IHS Markit, which compiles the PMI data.
While there are clear signs that demand is cooling since peaking in the second quarter, the survey also points out that business activity is increasingly being constrained by shortages of materials and labour, most notably in the manufacturing sector but also in some services firms. The PMI for the services sector was down 54.6 in September from 55.0 in August, its lowest level since February when Britain was still in lockdown.
Business expectations among services companies dropped to a nine-month low and they raised prices on the broadest basis since records were set in mid 1990 s.
Brexit was often quoted as having exacerbated global pandemic-related supply and labour market constraints as well as being often blamed on lost export sales, Williamson said.
While the BoE has said it expects the current rise in inflation to be transitory, the increase has put rate-setters under more pressure to explain how they plan to unwind the stimulus launched last year to help the economy through the COVID 19 pandemic.
The PMI for the manufacturing sector fell from 60.3 in September to 56.3 in August, also marking its lowest level since February.