The market had to run out of steam sooner or later. REUTERS/Eddie Keogh Britain's services sector, which accounts for more than 75% of the country's GDP, is starting to run out of steam, following a surge since last June's referendum, according to the latest PMI data from Markit and CIPS.

The services sector — which includes everything from banking to waitressing — drew a reading of 53.3 in the month, significantly lower than the 54.5 reading in January, and below the forecast 54.2 reading.

"UK service sector firms remained in expansion mode during February, but growth momentum eased further from the 17-month peak seen at the end of 2016," a release from Markit said.

"The slowdown mainly reflected a softer pace of new business growth, which some respondents linked to more cautious spending among consumers."

Samuel Tombs, chief economist at research house Pantheon Macroeconomics said the number is the clearest indicator yet that the UK is "entering stagflation."

The purchasing managers index (PMI) figures from IHS Markit are given as a number between 0 and 100.

Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the number is, the better things look for the UK.

Here is IHS Markit's chart of the PMIs longer-term trend (note the big drop off since late 2016):

Commenting on the data, IHS Markit's chief business economist Chris Williamson pinned much of the survey's underperformance on the slowdown in consumer spending that has started to hit the UK in recent months. Here is the key extract.

"A further slowdown in UK business activity growth in February adds to evidence that the economy has lost momentum after the impressive expansion seen at the end of last year. The PMI surveys are collectively signalling GDP growth of 0.4% in the first quarter. “Weaker consumer spending was a key cause of slower service sector growth, suggesting that household budgets are starting to crack under the strain of higher prices and weak wage growth."

Samuel Tombs of Pantheon Macroeconomics was downbeat on the data, saying that it is the first clear indicator of stagflation — where high inflation combines with stagnant demand in the economy — hitting the UK. Here is Tombs' key quote from a note circulated on Friday morning (emphasis ours):

"The decline in the services PMI to a five-month low in February is the clearest sign yet that the U.K. now is enduring stagflation. The business activity index is consistent with quarter-on-quarter growth in output in the non-distribution private services sector slowing to around 0.2% in Q1 from 0.7% in Q4.

"Granted, the PMI often is influenced excessively by sentiment and it was far too downbeat immediately after the referendum. But the recent rally in equity prices should have boosted corporate confidence. In addition, the services PMI was too downbeat last year because it excludes the retail sector, which benefited from a surge in consumer spending. Evidence on retail spending so far this year has been disappointingly weak."