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Free AccessMNI: UK April Services PMI Second-Lowest since September 2016
-CIPS/IHS Markit UK Services 52.8 in April Vs PMI 51.7 in March
By Jai Lakhani
LONDON (MNI) - The UK services sector edged higher after it posted its
weakest performance since July 2016 in March, data from the IHS Markit/CIPS
survey showed.
The UK Services Purchasing Managers' Index (PMI) rose 1.1 points in April,
up from 51.7 in March, below the MNI median estimate of a rise to 53.8.
The latest upturn in service sector output was the softest for just over a
year-and-a-half. Subdued new business growth persisted in April which
contributed to a further slowdown in the rate of job creation.
Anecdotal evidence points to higher payroll costs continuing to drive up
operating expenses and place a squeeze on operating margins. The latest rise in
average input costs was linked to increased national living wage and rising
pension contribution.
--BOE FOOD FOR THOUGHT
Chris Williamson, Chief Business Economist at IHS Markit, said that the
CIPS data were compatible with the signs that the rate of economic growth
remained disappointingly subdued at the start of the second quarter. He adds
that "The disappointing services data will add to expectations that the MPC will
take its finger firmly off the rate hike trigger."
--LACK OF CONFIDENCE
The slowdown in new-order growth was cited by a number of survey
respondents as a result of subdued consumer willingness-to-spend which had held
back business activity growth in April. As well as the soft patch from
consumer-facing firms, there were also reports that there were concerns about
the domestic economic outlook which acted as a brake on spending from corporate
clients.
--COST PRESSURES EASE
Despite the anecdotal evidence pointing towards increase national living
wage and rising pension contributions, the overall rate of input price inflation
eased since March and remained softer than at any time in 2017. Furthermore, the
the latest rise in average prices charged by services sector firms was the
joint-slowest since July 2017.
Whilst the April picture is relatively neutral, the survey suggests an
improvement in business confidence across the service sector. The balance of
companies expecting a rise in business activity over the year ahead reached its
highest level since January. This was a result of forthcoming product launches,
new marketing plans and discounting strategies.
Of the April result, Williamson argued that the three PMI surveys together
have shown a "muted rebound in business activity after being disrupted by heavy
snowfall in March," and notes that the fact that April has failed to regain
February's pace of growth "suggest that the underlying performance of the
economy has continued to deteriorate."
The key driver behind the insignificant rise according to Duncan Brock,
Director of Customer Relationships at the Chartered Institute of Procurement &
Supply, was down to consumers "continuing to rein back spending," which in turn
has facilitated some "potential stumbling blocks to the health of the sector as
respondents pointed to the additional pincer movement of unsupportive economic
conditions, and ongoing damage from Brexit uncertainty weighing down on business
margins."
Thursday's services result follows the more downbeat results of its sister
manufacturing and construction surveys published Tuesday and Wednesday
respectively which alluded to weak growth in activity in both sectors. The
manufacturing PMI slowed to 53.9 in April while the equivalent construction rose
to 52.5 which was below its considered 53.0 threshold of growth.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com
[TOPICS: MABDS$,M$B$$$,M$E$$$,MT$$$$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.