UK Growth Cools in September as Services Hold Steady but Manufacturing Falters
Composite PMI Slips to Four-Month Low
The UK private sector slowed in September as the S&P Global Flash UK Composite PMI Output Index fell to 51.0, down sharply from August’s 12-month high of 53.5. While a reading above 50.0 still indicates growth, this was the weakest pace since May, signaling that the UK economy’s momentum is beginning to fade.
For Forex traders, this data is important because it reflects the pulse of the UK economy. A weaker PMI print can weigh on the British pound (GBP/USD), especially if investors see softer growth ahead. As GME Academy reminds Forex trading beginners, PMI is often a leading signal of currency movement because it captures real-time business conditions.
Services Remain Resilient
The services sector—covering industries like finance, tech, and consumer-facing businesses—was the bright spot once again. The UK Services PMI Business Activity Index came in at 51.9, still in expansion but down from August’s 54.2. Respondents noted that rising business and consumer spending kept growth positive, though it was constrained by weak client confidence and ongoing political and economic uncertainty.
This divergence between services and manufacturing highlights a “two-speed economy.” For everyday citizens, it means restaurants, banks, and retailers are still busy, but factories continue to struggle. For Forex traders, the services side is helping to keep the pound supported, even while weak manufacturing data acts as a drag.
Manufacturing Hits a Six-Month Low
On the other hand, the UK Manufacturing PMI fell to 46.2, down from 47.0 in August, marking its lowest level in five months. The Manufacturing Output Index dropped even further to 45.4, the weakest in six months. Both readings are well below 50.0, signaling contraction.
Survey responses showed shrinking order books, sluggish export sales, and specific production setbacks, such as plant stoppages at Jaguar Land Rover affecting the automotive supply chain. Export demand was especially soft from the US and Europe, though some firms reported improved orders from emerging markets.
For the GBP, manufacturing weakness raises concerns about the UK’s broader growth story, which could make the pound vulnerable against major pairs like GBP/USD or GBP/JPY.
Rising Costs Pressure Firms and Jobs
Input costs remained a major challenge in September. Firms across both manufacturing and services reported higher bills for wages, energy, food, and technology. Service providers, in particular, faced elevated wage pressures as suppliers passed on higher payroll costs.
The squeeze on margins contributed to the 29th consecutive month of falling backlogs of work and ongoing job cuts. Employment fell again, with many businesses freezing hiring or choosing not to replace departing staff. For UK households, this means fewer job opportunities and restrained wage growth. For traders, weakening labor demand signals slower momentum in consumer spending, which can weigh on currency performance.
Inflation Diverges Across Sectors
While services firms continued to raise their prices at a solid pace in September, manufacturers saw factory gate price inflation cool sharply to its softest level since December 2024. This divergence reflects competitive pressures in manufacturing versus pricing power in services.
For the Bank of England (BoE), this creates a policy challenge. Persistent service inflation could argue for keeping monetary policy tight, but weak growth and manufacturing struggles may make aggressive tightening less likely. Forex traders should monitor how the BoE balances these trade-offs, as its signals directly impact the pound.
Business Confidence Softens, But Manufacturers Turn Hopeful
Overall business confidence slipped to a three-month low, driven by service-sector pessimism. Firms cited squeezed client budgets, political uncertainty, and subdued demand as reasons for caution.
Interestingly, manufacturers were more upbeat—the most optimistic since February. Some companies pointed to expectations of major technology projects, such as data centres, as well as stronger business investment ahead. If these pipelines materialize, manufacturing could stabilize in the months to come.
What Traders Should Watch
For Forex trading beginners, here’s how to read the September UK PMI data:
Composite PMI at 51.0 → still expanding, but momentum is slowing.
Services PMI at 51.9 → modest growth, but weaker than August.
Manufacturing PMI at 46.2 → contraction continues, highlighting structural weakness.
Rising costs + weaker hiring → signals economic fragility, which can weigh on the pound.
The likely near-term outcome: the pound may remain under pressure if investors believe the UK economy is losing steam, especially compared to peers like the US. However, any positive surprises from services or stronger business investment could provide relief for GBP/USD.
Why This Matters to You
For Filipinos following the Forex market, these numbers ripple across currency exchange rates. If the pound weakens, it affects remittances, imports, and even how overseas earnings are converted. Understanding PMI reports helps everyday traders anticipate moves in currency pairs like GBP/USD or EUR/GBP.
Want to learn how to apply insights like this directly to your trading?
Join GME Academy’s free Forex Trading Workshop today. You’ll discover how to interpret PMI data, track global events, and build strategies that fit your goals. Don’t just watch the markets—start trading with confidence with Global Markets Eruditio
