UK Services Activity Grows At Fastest Pace In 6 Months: Survey

--October IHS Markit/CIPS Services PMI 55.6 vs 53.6 September

By Jamie Satchithanantham

     LONDON (MNI) - UK service sector activity expanded at its fastest pace

since April courtesy of improved order books, resilient client demand and lower

operating costs, a survey published Friday showed.

     The September Services PMI survey by IHS Markit, conducted for the

Chartered Institute for Procurement and Supply, rose 2.0 points to 55.6 from

53.6 in September, above the MNI expectation of 53.2. It has now stood above the

50.0 neutral mark for the fifteenth consecutive month with October's reading

slightly above its post-crisis trend.

     It marks a 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. 

     September's report noted the New Orders subcomponent falling to its lowest

level since August 2016 but this was partially reversed in October, rising to

its highest level since May, and was the primary force behind the 2.0 point rise

in the headline index.   

     Elsewhere, operating expenses were reported to have fallen in October with

the survey's measure of input costs inflation easing to its lowest level in

exactly one year. Despite the fall, input prices remain elevated with factory

gate prices still continuing to head north. Prices charged inflation reached a

six-month high in October. 

     "Selling prices rose at an increased rate, but cost pressures eased, the

latter suggesting selling future price inflation may cool, taking pressure off

any need for further rate hikes any time soon," Chris Williamson, Senior

Economist at IHS Markit, said.

     Last week, the official preliminary estimate of Q3 GDP data surprised to

the upside, rising by 0.4% q/q and was largely driven by the business services,

the financial sector and computer programming activities -- all sub-sectors of

UK services output. This GDP report also included the ONS' estimate for the

September Index of Services which was pencilled in steady with the 0.2% m/m

outturn in August.  

     Friday's services survey showing follows a bolstering in both its

manufacturing and construction sister surveys. The manufacturing PMI rose 0.3

points to 56.3 last month while the construction PMI climbed back into

expansion, rising 2.7 points to 50.8, having dropped into contraction territory

for the first time in thirteen months.     

     "The good news was that October saw business activity across services,

manufacturing and construction grow at its fastest rate for six months. The data

point to the economy growing at a quarterly rate of 0.5%, representing an

encouragingly solid start to the fourth quarter," Williamson added.  

     The full IHS Markit release can be seen here: https://goo.gl/emhH7o 

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

--MNI London Bureau; +44 203 865 3809; email: kieran.williams@marketnews.com

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