The preliminary S&P Global Flash Composite Purchasing Managers’ Index for October fell to 51.7 from September’s 52.6, holding above the 50 mark that separates growth from contraction but the lowest since November 2023.

A Reuters poll of economists had pointed to another reading of 52.6.

The business activity index for the dominant services sector fell to a 11-month low of 51.8, while the manufacturing index slid to a six-month low of 50.3, hit by a sharp contraction in goods orders from abroad. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey suggested the economy was growing at a quarterly rate of just 0.1% in October.

“Clearly, the policies announced in the budget have the potential to play a major role in steering the direction of the economy in the months ahead,” he added.

Williamson said uncertainty about conflict in the Middle East and Ukraine as well as the U.S. presidential election were adding to firms’ jitters about the economic outlook.

Prime Minister Keir Starmer‘s government is targeting faster economic growth to allow for higher public spending. But weakening business optimism may pose a challenge for the government which is hoping to boost investment. Finance minister Rachel Reeves will set out her budget plan for taxes and spending next Wednesday. She has warned that some taxes will have to go up after identifying a 22 billion-pound fiscal hole soon after coming to power in July.

Official figures published on Tuesday showed the government borrowed more than expected by Britain’s official budget forecasters in the first six months of the tax year.

October’s PMI data also showed a cooling in companies’ cost pressures, with some firms citing lower commodity prices and decreased fuel costs. Input price inflation dropped to 57.8 – the lowest since December 2020.

“A further cooling of input cost inflation to the lowest for four years opens the door for the Bank of England to take a more aggressive stance towards lowering interest rates, should the current slowdown become more entrenched,” Williamson said.

S&P Global said employment this month contracted for the first time since last December led by the sharpest fall in service sector employment in 13 months. (Reporting by Suban Abdulla Editing by William Schomberg and Christina Fincher)