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LONDON, Dec 5 (Reuters) – Britain’s services sector shrank slightly for a second month running in November, as cost-of-living pressures dampened demand for households and businesses uncertain about the economic outlook, a survey showed on Monday.
The S&P Global/CIPS Purchasing Managers’ Index (PMI) for the services sector was held at 48.2 last month, matching October’s 21-month low and November’s previous ‘flash’ estimate.
Combined with last week’s manufacturing PMI, the data showed Britain’s economy contracting at a quarterly pace of 0.4%, S&P Global economist Chris Williamson said.
“The UK economy has faced the toughest spell since the global financial crisis, barring only the height of the pandemic,” he said.
The composite PMI, which combines services and manufacturing, held at 48.2, the lowest since January 2021 when Britain was in a COVID-19 lockdown.
Both the Bank of England and the government’s Office for Budget Responsibility estimate that Britain’s economy is entering recession after output fell by 0.2% in the three months to the end of September.
The Organization for Economic Co-operation and Development (OECD) predicted last month that Britain is likely to see Europe’s biggest drop in economic output next year outside of Russia.
S&P Global said businesses reported higher confidence than in October, when morale was hit hard by political and financial market turmoil over September’s mini-budget, but sentiment remained “historically depressed”.
PMI survey respondents said inflation at 11.1%, the highest in 41 years, has dampened consumer demand and business customers were cautious about spending.
While cost pressures have eased somewhat for manufacturers, they have picked up in the services sector and are not far below the record levels seen in early 2022.
Businesses cited higher wage costs, energy bills and prices for raw materials such as food, while increased competitive pressures meant they raised prices at the slowest pace since January, before Russia invaded Ukraine.
Unlike the manufacturing sector, service employers are still adding staff, albeit at the slowest pace since February 2021.
“There were reports of hiring freezes and not replacing holidays as companies worried about costs and operating margins,” S&P Global said.
Reporting by David Milliken; Editing by Toby Chopra
Our Standards: The Thomson Reuters Trust Principles.
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