April 23, 2024 08:38 GMT
PMI: Services PMI surprises to the upside, but services price rises stall
UK DATA
Similar to the surprises seen in the French, German and Eurozone flash PMIs, the UK sees an upside surprise to the composite (54.0, exp 52.6, prior 52.8) and services PMIs (54.9, 53.0 exp, 53.1 prior) and a downward surprise to manufacturing (48.7, 50.4 exp, 50.3 prior). The labour market was mixed but there were cost pressures related to the introduction of the national living wage. Importantly. however, services output prices moderated - which will be of great importance to the decision for the MPC to deliver the first cut.
The press release notes:
- "Output growth was supported by a solid upturn in new order volumes and a modest acceleration in staff hiring, in each case driven by the service economy."
- The national living wage is causing cost pressures: "April data indicated a steep increase in average cost burdens across the private sector, with the rate of inflation up sharply from March and the highest since May 2023. Stronger input price inflation was overwhelmingly linked to higher staff wages, particularly in the hospitality and leisure sector. Many survey respondents noted pressure on labour costs from a near 10% annual increase in the National Living Wage and an indirect impact on pay awards to other employees."
- However, there has been some easing of services price inflation: "In contrast to the trend for input costs, latest data signalled a slight moderation in the rate of prices charged inflation across the UK private sector economy. Moreover, the overall increase in output charges during April was the slowest seen since February 2021. This was driven by another fall in prices charged inflation across the service economy. Survey respondents suggested that competitive pressures and efforts to stimulate sales had limited their scope to pass on higher salary costs to clients."
- It's a bit mixed on the employment side: "The rate of job creation nonetheless picked up since March and was the fastest for nine months. Additional recruitment was attributed to rising business activity and a subsequent need to boost operating capacity. Some firms cited constraints on hiring amid a shortage of candidates to fill vacancies. A number of firms also noted the nonreplacement of voluntary leavers due to cost pressures."
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