Inflation pressures rise as growth slows in services sector

New figures show the economy is still rebounding, but is losing some of the momentum it had in the early days after lockdowns lifted.

The sector scored a strong 59.6 in July in the IHS Markit/Chartered Institute of Procurement & Supply (Cips) UK services purchasing managers’ index (PMI) report that surveys business leaders around the country. It was lower than June's 62.4, but economists had feared worse still, with predictions setting the score at 57.8.

Tim Moore, economics director at IHS Markit, said: “More businesses are experiencing growth constraints from supply shortages of labour and materials, while on the demand side we've already seen the peak phase of pent-up consumer spending.”

But spending was also hit by the hundreds of thousands of Brits who were forced to stay at home after being in close contact with someone who later tested positive for Covid-19, the survey found.

The PMI survey found that wages were being pushed up, fuel prices were increasing, and transport bills were also rising. Inflation has not been this high since the monthly studies started more than two decades ago.

As a result the companies that were surveyed increased what they charged for their services at the fastest rate in 25 years.

Duncan Brock, group director at Cips, said: "We suspect the best of the post-pandemic recovery could be behind us, especially if higher leisure and hospitality costs diminish appetite for consumer spending.”

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