UK services firms slow their price increases, PMI shows

LONDON (Reuters) - British services firms lost some momentum but continued to grow in September and the prices they charged rose at the slowest pace in almost four years, according to a survey likely to be welcomed by the Bank of England.

The S&P Global UK Services Purchasing Managers Index published on Thursday dropped to 52.4 last month from 53.7 in August which was its fastest since April.

September's reading was also lower than a preliminary estimate of 52.8.

"The September PMI surveys suggest that the UK economy is still on a positive trajectory, with improving order books accompanied by cooling inflationary pressures," Tim Moore, Economics Director at S&P Global Market Intelligence, said.

"Most encouragingly, prices charged inflation in the service sector, which acts as a barometer of domestic inflationary pressures, edged down to its lowest since February 2021."

The BoE is watching service sector prices as it tries to assess inflation pressure in the economy. Investors largely expect the BoE to follow up on its August interest rate cut with another cut in November after pausing in September.

The slowdown in prices charged by services firms was the third in a row reported by the monthly PMIs although it remained higher than the historical average. Prices paid by firms edged up from a 43-month low in August.

The survey also showed strength in order books - mainly from domestic clients - which boosted business expectations for the year ahead.

However, there was some hesitation among executives on taking key decisions ahead of finance minister Rachel Reeves' first budget due on Oct. 30.

Reeves has warned of some tax increases as she tries to find the money to improve public services and to invest to help the economy grow more quickly.

The composite PMI - combining the services data with Tuesday's manufacturing survey - slipped to 52.6 from August's 53.8.

The manufacturing PMI showed manufacturers turned much more pessimistic last month on worries about the budget combined with concerns about conflict in the Middle East and strong inflation pressures.

(Reporting by William Schomberg; Editing by Toby Chopra)