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The UK service sector continued to expand in September but severe supply constraints lifted inflationary pressures, final survey data from IHS Markit showed on Tuesday.

The Chartered Institute of Procurement & Supply final services Purchasing Managers’ Index registered 55.4 in September, up slightly from August’s six-month low of 55.0 and the flash 54.6.

New order growth weakened for the fourth month in a row. Staff shortages, supply issues and the end of the stamp duty holiday were among the most commonly cited reasons for softer demand.

The survey showed that a lack of candidates to fill vacancies and persistently high numbers of departing staff acted as a considerable brake on employment growth.

Supply chain difficulties resulted in another round of steep input price inflation at service sector companies in September. Data showed that output charge inflation was the steepest since the survey began in July 1996.

“As prices charged rose at their fastest rate since 1996, it seems the floodgates are open for higher inflation to wash through the UK economy and firms fear the growth this month may be eroded further by higher costs and shortages as we move towards the festive period,” Duncan Brock, Group Director at the CIPS, said.

Business optimism eased slightly since August. However, the majority of panel members expect a rise in output during the year ahead.

The survey showed that the slower manufacturing production growth was a key factor holding back the UK economy in September.

The composite output index posted 54.9 in September, up fractionally from 54.8 in August. The reading was also above the flash level of 54.1.


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