MNI: UK October Services PMI Weakest Since Snow-Hit March

--CIPS/IHS Markit UK Services PMI 52.2 in Oct vs 53.9 in Sep

By Jamie Satchi

     LONDON (MNI) - The UK CIPS/IHS Markit services sector PMI fell by almost

two points to 52.2 in October, down from 53.9 in September, the lowest reading

in seven months -- when activity was hampered by adverse weather conditions.

     --PMI LOWEST SINCE JULY 2016

     While the October result was the 27th consecutive 'plus-50' reading, it was

also the second-lowest outcome in over two years. The slightly dampened rate of

growth was pinned down to "heightened economic uncertainty and a soft patch for

new work," according to survey compliers IHS Markit.

     The data follows a moderation in the manufacturing PMI, published last

Thursday, and according to Chris Williamson, Chief Business Economist at IHS

Markit, is consistent with a sharp growth fall back in Q4. 

     Growth in Q3, for which a preliminary figure is to be published later this

week, is expected to come in at 0.6% but many market spectators, including the

Bank of England, look for a more modest Q4 reading.

     The latest PMI data will serve to add weight to those claims.  

     --BREXIT WOBBLES  

     "The disappointing service sector numbers bring mounting evidence that

Brexit worries are taking an increasing toll on the economy," said Williamson. 

     "Combined with the manufacturing and construction surveys, the October

services PMI points to the economy growing at a quarterly rate of just 0.2%,

setting the scene for GDP growth to weaken sharply in the fourth quarter," he

added. 

     --NEW ORDERS SOFT

     For the third time in four months order book growth moderated in October,

falling to the weakest recorded since July 2016. A number of firms reported that

Brexit-related uncertainty and concerns over the global economy were weighing on

demand for business services.     

     There was anecdotal evidence from multiple firms of subdued consumer

spending in October. Hotels, restaurants, and leisure-based firms all admitted

to weaker performances on the month.

     The slower pickup in orders offered firms the chance to alleviate pressures

on their operating capacity. Order backlogs, or unfinished orders, receded to

their lowest level since April. 

     --HIRING STRUGGLES; COSTS UP

     A moderate rate of job creation continued across the service sector, with

firms continuing to report a lack of suitably skilled workers to fill firms'

vacancies.

     Meanwhile, input costs were said to have risen over October, specifically

higher transport and staff costs. In addition, weaker sterling was said to have

been culpable for higher export prices.    

     Increased operating expenses led to the fastest rise in prices charged by

service sector firms since June.

     --NOT JUST BREXIT

     "The survey responses also suggest that the economy is facing other

headwinds, including a broader global slowdown, trade wars, heightened

geopolitical uncertainty and tightening financial market conditions," said

Williamson.

     "It therefore remains unclear as to the extent to which Brexit worries are

exacerbating or obfuscating a more broad-based slowing of the economy, which

would have important implications for policymaking," he added. 

--MNI London Bureau; +44 203-586-2226; email: jamie.satchithanantham@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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