The Composite Output Index fell to 51.7 in September from 52.5 in August, a three-month low. The September reading is consistent with growth of only around 0.1% at a quarterly rate, while the survey as a whole now points to roughly 0.2% GDP growth in Q3, down from the 0.3% indicated a month ago. Input cost inflation meanwhile rose to its highest since June.
| Index | Aug 2026 (final) | Sep 2026 (flash) | Change | Direction |
|---|---|---|---|---|
| Composite Output | 52.5 | 51.7 | −0.8 | Slower growth |
| Services Business Activity | 52.5 | 51.7 | −0.8 | Slower growth |
| Manufacturing PMI | 51.7 | 52.0 | +0.3 | Faster improvement |
| Manufacturing Output | 52.1 | 51.4 | −0.7 | Slower growth |
August's flash PMI had S&P Global pencilling in third-quarter growth of around 0.3%. A month later that estimate has slipped to around 0.2%, while September's pace in isolation is consistent with growth of barely 0.1%. Firms cite uncertainty over government policy in the run-up to the Budget as one reason.
Q3 was still better than Q2. The Composite averaged 52.1 over the quarter against 50.5 in the three months before, and S&P calls that an acceleration, if a sluggish one. The rebound happened. Momentum is now draining out of it as the quarter closes.
New orders are the bigger worry. Total new work fell for the first time in three months, led by services, where clients are holding back. Firms can live off existing order books for a month or two, not a year. Exports offer no cover: overseas sales fell at the fastest pace since June, and manufacturers lost export orders for the first time since December.
Manufacturing's improvement to 52.0 flatters the sector. Output growth is at a six-month low. Employment rose for a sixth month, partly as firms dealt with the fastest rise in backlogs since January 2022. That is rather less reassuring than the PMI suggests. A backlog is old orders still waiting to ship, and the new ones stopped coming from abroad this month.
Prices are moving the other way. Input cost inflation rose for a second month to its highest since June, and firms passed it on: output prices also rose at the fastest pace since June. Fuel, energy, wages, copper and steel all featured. Slower growth with rising pipeline inflation is the worst mix for both the Bank and the Treasury.
S&P's read of roughly 0.2% growth in Q3, with September running at barely 0.1%, is a survey-based estimate, not an ONS figure. If the official data bear it out, the Chancellor goes into the autumn Budget with an economy barely growing. Weak growth hits the fiscal arithmetic twice: receipts fall short and the debt ratio rises.
S&P is unusually explicit here. Its price gauges reinforce the Bank of England's hawkish bias, particularly as service-sector price pressures picked up, but the weak growth picture reduces the case for an imminent hike. The MPC held Bank Rate at 3.75% on 17 September by 6–3, with Greene, Mann and Pill voting for 4.0%. Energy and supply shocks are what monetary policy is worst at fixing. The Bank cannot cut its way out of a fuel bill. Nor can it ignore rising selling prices.
Firms listed higher market borrowing costs among this month's headwinds. The gilt market's verdict on fiscal credibility is now showing up in company surveys as a drag on activity. Bond markets set the terms for the real economy, and Westminster keeps forgetting it.
Private-sector employment has fallen continuously for roughly two years on the survey. The pace has eased and factories are hiring, but firms still cite high operating costs and efficiency drives as reasons not to add staff. That is what making employment more expensive looks like.
The summer rebound from the second-quarter PMI contraction was real, but never strong, and September shows it fading as the quarter ends. Services are slowing, new business has turned down, exporters are losing ground in Europe and the manufacturing upturn rests on backlogs rather than fresh demand.
Cost inflation is heading the wrong way. Energy and fuel remain the main culprits. That is a supply problem, and only supply-side policy fixes it.
Policy signal: this economy needs lower costs, not more demand. Cheaper energy, a lighter tax burden on employment and a credible fiscal plan that brings borrowing costs down would do more for growth than anything the Bank can offer. The Budget will show whether the Treasury has grasped that.