Neil DennisThe latest purchasing manager surveys of Britain's services industry showed growth in the country's dominant business sectors slowed further in August.
Consumer-facing sectors showed the worst performances in the purchasing manager data, which echoed a survey by the British Retail Consortium published at midnight, that showed growth in terms of volume was slowing.
Purchasing managers' index (PMI)
While business in the services sectors continued to expand in August, it did so at a slower pace than in July, with the headline PMI dropping to 53.2 from 53.8 and missing analyst forecasts of 53.5.
Survey respondents noted "subdued client demand" and "heightened uncertainty" over the economic outlook weighed on growth in August. Indeed, new order volumes rose at their slowest pace in 11 months.
Respondents also said that fragile business confidence related to uncertainty over the path of Brexit negotiations had led to delayed spending decisions from clients.
Shoppers will continue to feel the pinch as import prices rise due to the weaker pound - Source: ShutterstockInflationary pressures building
The PMI survey also indicated cost pressures were building up as input price inflation rose at its fastest pace since February due to higher staff costs and prices for imported items.
Some respondents suggested that recent exchange rate depreciation against the euro would also likely drive up costs in the near-term.
Chris Williamson at IHS Markit, which compiles the PMI survey, said the data was unlikely to add any further pressure on the Bank of England to raise interest rates, despite consumer inflation currently running at an above target 2.6%.
He said: "The overall level of the PMI remains more consistent with policymakers erring towards stimulus rather than hiking interest rates, suggesting the doves will continue to outnumber the hawks."
Retail sales
A separate report, published at midnight by the British Retail Consortium saw retail sales hold up in August, rising by an annual 1.3% from 0.9% in the previous month.
The figures belied a less positive story about the health of consumer spending, however, said Helen Dickinson, BRC chief executive, as strong figures for food sales reflected rising prices, leaving growth in volume terms weaker than a year ago.
"Purchasing decisions are very much dictated by a shrinking pool of discretionary consumer spend," she added, indicating the squeeze on household budgets from low wage growth and above target inflation.
Alex Marsh, managing director at Close Brothers Retail Finance, commented on the data: "Retailers should be cautious and prepare for consumer spending to slow."
"In an unstable economic climate where wages remain stagnant, consumer borrowing has peaked and there is no guarantee that the Bank of England will keep rates low, retailers need to prepare themselves for the bumpy ride ahead."
Market reaction
Sterling was little moved by the data. Against the dollar, the pound eased 0.1% to $1.2924, and against the euro it was fractionally higher at €1.0878.
UK stocks moved higher as recent geopolitical jitters, for time being, settled. The FTSE 100 climbed 0.2% in mid-morning trade in London to 7,429.48.