By Andy Bruce

LONDON (Reuters) – Britain’s economy lost more momentum this month as businesses grappled again with rising costs, a survey showed, highlighting the difficult backdrop for Bank of England officials ahead of Thursday’s interest rate decision.

In September, the preliminary flash composite IHS Markit/CIPS purchasing managers’ index fell to 54.1, down from 54.8 in August.

An economist poll by Reuters had predicted a reading 54.5 This survey revealed a slowerdown in the services as well as manufacturing sectors.

Officials from the BoE will see the readings before the announcement of their 1100 GMT policy. The data adds to concerns about a slowing economy and inflation that is being fueled by rising energy costs and global supply chain problems.

Chris Williamson (chief business economist, IHS Markit), who compiles the PMI data, said that “The September PMI will increase concerns that the UK is heading towards a bout’stagflation”.

The survey shows that there is evidence of a cooling in demand since the peak in the second quarter. However, it also indicates that business activity is being constrained by a shortage of labour and materials, particularly in the manufacturing sector, but also some service firms.

From 55.0 in August’s PMI, it fell to 54.6 for the service sector in September. This was its lowest point since February while Britain was in lockdown.

Services companies’ business expectations fell to nine months lows and prices were raised on the widest basis since mid-1990s records began.

Williamson stated that Brexit was frequently cited for having increased global pandemic-related supply constraints and labour market restrictions, along with being often blamed on lost sales.

The BoE said that it expected the current increase in inflation to be temporary. However, the rate-setters have been under increasing pressure to elaborate on how they intend to reverse the stimuli last year which was designed to aid the economy with the COVID-19 epidemic.

In September, the PMI in manufacturing fell to 56.3 from 60.3 in August. This is also its lowest point since February.