The UK services sector, which accounts for the majority of the country's economy, contracted in January, according to the S&P Global UK services PMI survey. The survey scored 50.8 in January, down from 51.1 in December, marking the joint lowest level in 15 months. Any reading above 50 indicates growth, while a score below 50 signifies contraction.
The contraction was driven by a combination of factors, including rising inflation, subdued consumer sentiment, and increased costs for businesses. The survey found that the rate of cost inflation was the highest in nine months, driven by rising salary payments and suppliers passing on higher costs. The Bank of England is expected to announce its latest decision on interest rates on Thursday, with most experts predicting a quarter-point cut to 4.5%.
The Bank of England is under pressure to cut interest rates to boost growth, but it generally only does so when inflation is under control. The heightened inflation in the services sector, coupled with sluggish growth, presents a significant challenge for policymakers.