MNI: UK Services Sector Activity Hits 4-Month High In Feb

-CIPS/IHS Markit UK Construction PMI 54.5 in Feb Vs 53.0 Jan

By Jamie Satchithanantham & Jai Lakhani

     LONDON (MNI) - The UK services sector regained some growth momentum in

February, with business activity hitting a four-month high, data from the IHS

Markit/CIPS survey showed.

     The UK Services Purchasing Managers' Index (PMI) rose 1.5 points to 54.5 in

February, up from 53.0 in January, exceeding the market consensus for a 0.5

point rise to 53.5.   

     The rise in the headline index was driven primarily by a surge in incoming

orders but also better job creation and lower cost pressures. 

     --NEW ORDERS HIGHEST SINCE LAST MAY

     The bright spot in February's data was an uptick in new orders, which

expanded to a level last seen higher nine months ago. Service providers said

that there was a marked rise in business-to-business sales growth in February,

helped by the improving global economic backdrop. 

     That said, stretched household incomes remained a factor holding back

domestic consumer demand, according to the survey.

     In addition, rates of job creation also jumped higher in February.

Employment numbers expanded by the largest degree since last September, driven

by "stronger-than-expected sales growth and subsequent efforts to expand

business capacity". 

     Service providers nonetheless continued to cite concerns about tight labour

market conditions and low candidate availability rates.

     --COST PRESSURES EASE TO 1.5YR LOW

     Accompanying the pickup in activity was a moderation in input cost

pressures which fell to the lowest level since August 2016 and this relayed into

a moderation in output prices to a six-month low. 

     According to the survey, some firms noted that "exchange-rate driven cost

pressures had stabilised in recent months", however costs were also held up

higher staff salaries and transport costs.  

     Looking forward, firms signalled that confidence towards the year-ahead

business outlook eased since January but despite this the level of optimism

remained higher than at any time seen in the second half of 2017.

     Of the February result, Chris Williamson, Chief Business Economist at IHS

Markit, argued that a "resiliently steady pace of expansion has been

maintained."

     With cost-push pressures resulting from labour and materials shortages not

being passed on to customers, Williamson said price inflation "cooled to a

six-month low". Price inflation peaked late last year and therefore some cooling

effect was to be expected.

     The key driver behind the expansion according to Duncan Brock, Director of

Customer Relationships at the Chartered Institute of Procurement & Supply, was

business customers having the "confidence to forge ahead with orders" despite

customers hesitating over concerns regarding future rate rises. Further to these

encouraging signs was hiring levels continuing to rise and doing so at "the

fastest rate since September 2017."

     Monday's services result follows the more downbeat results of its sister

manufacturing and construction surveys published last week which alluded to weak

growth in activity in both sectors. The manufacturing PMI slipped to an

eight-month low of 55.2 in February while the equivalent construction measure

rose only modestly 51.4.     

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

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

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

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