MNI: 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

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