The UK's service sector lost momentum in November, revealing a fragile operating environment shaped by weak demand, subdued confidence and persistent cost pressures. The services PMI slipped to 51.3 from 52.3, signalling only a marginal rise in activity and the slowest growth since the summer. Businesses pointed to delayed investment decisions and cautious spending ahead of the Budget, which contributed to the first drop in new orders since July. Export demand deteriorated further, with the fastest fall in overseas sales since June due to global economic uncertainty and intensified competition.

Firms responded to shrinking pipelines by reducing staffing, leading to the sharpest decline in employment in nine months. Input costs surged, driven by wages, raw materials, fuel and insurance, yet companies were able to raise prices only marginally, resulting in the weakest output price inflation since early 2021. Despite these headwinds, half of surveyed firms remain optimistic about future activity, though sentiment is weaker than recent post-pandemic trends.

The broader composite PMI echoed this softness, with private sector growth moderating to 51.2 amid falling new work and constrained hiring. Overall, November's data portray an economy still expanding, but under clear strain from hesitant demand, rising costs and global uncertainty. The latest update takes the RPI to minus 21 and the RPI-P to minus 35, meaning that economic activities continue to lag expectations in the UK.

The consensus looks for no revision from the flash at 50.5 for composite and for services too.

The Services Purchasing Managers' Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM non-manufacturing index in the U.S. and the S&P Global PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The S&P Global PMI services data give a detailed look at the services sector, how busy it is and where things are headed. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.