MNI: UK Services Activity Growth Eases From Oct High: Survey

--November IHS Markit/CIPS Services PMI 53.8 vs 55.6 October

By Jamie Satchithanantham

     LONDON (MNI) - UK service sector activity growth eased in November,

slipping from the six-month high recorded in October, a survey published Tuesday

showed.

     The November Services PMI survey by IHS Markit, conducted for the Chartered

Institute for Procurement and Supply, fell 1.8 points to 53.8 from 55.6 in

October, below the MNI expectation of 55.0. 

     Despite the fall, largely driven by dearer inputs, smaller intakes of new

orders and weaker staff hiring, the PMI has now stood above the 50.0 neutral

mark for the sixteenth consecutive month although sits slightly below the

average set over 2017.

     It marks a modestly stronger, more optimistic start to the final quarter of

the year, depicting the sector regaining some steam having seen average activity

fall to 53.5 in Q3 from 54.3 in Q2.

     While respondents did report higher levels of business activity in

November, the rate of new business eased from October's level, coming in below

2017's average level. Firms noted that while consumer spending did pick up on

the month, "stretched budgets and Brexit related uncertainty had continued to

act as a brake on growth". 

     Order backlogs rose for the third time in four months. Whilst this was in

part attributed to increased pressures on firms' operating capacity, respondents

also said that rising volumes of unfinished work were also because of

recruitment difficulties and a lack of suitably skilled staff.

--PRICES ELEVATED

     Average factory gate costs increased sharply in November. Input price

inflation remains the strongest since the first half of 2011 with pressures

emanating from energy, food, fuel, imported items and staff salaries. 

     Attempts to shield the consumer from these higher prices failed. Prices

charged grew at the strongest pace since February 2008 and was the

second-fastest recorded since the survey's inception in 1996.   

     "Rising oil prices were again to blame in November, with firms also

reporting the need to pass higher costs of a wide variety of other inputs on to

customers as a result of the weak pound having driven up import prices," Chris

Williamson, Senior Economist at IHS Markit, said.

     "As such, the survey data suggest that inflationary pressures have yet to

peak," he added. 

     Tuesday's services survey followed upbeat manufacturing and construction

surveys. The manufacturing PMI rose 1.6 points to 58.2 in November while the

construction PMI edged further above the neutral 50-mark, rising 2.3 points to

53.1.

     "Despite the weaker service sector expansion, the latest survey data

indicate that the economy is on course to enjoy robust growth in the fourth

quarter. The survey data are so far consistent with the economy growing at a

quarterly rate of 0.45% in the closing months of 2017," Williamson said.

     "Uncertainty about the economic outlook, linked commonly to Brexit worries,

continued to permeate the business mood in November. However, for now, the

survey data indicate that a sufficient degree of optimism in pockets of the

economy, notably financial services, tourism, manufacturing and house building,

is helping the economy as a whole to sustain steady growth," he added. 

     The full IHS Markit release can be seen here: https://goo.gl/4H8Xxg

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

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