UK Services Activity Picks Up After August Dip: Survey

--September IHS Markit/CIPS Services PMI 53.6 vs 53.2 August

By Jamie Satchithanantham

     LONDON (MNI) - UK service sector activity gained ground in September, after

declining to an 11-month low in August, but remains fragile, a survey published

Wednesday showed.

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

Chartered Institute for Procurement and Supply, rose 0.4 points to 53.6 from

53.2 in August, above the MNI expectation for no change. It was above the 50.0

neutral mark for the fourteenth consecutive month.

     Completing the dataset for the quarter, September's result means the PMI

has averaged 53.5 over Q3, easing lower from 54.3 in Q2 and depicts a sector

losing some of its momentum. 

     Last month's report noted that the pace of growth since July was "notably

weaker than seen on average in the first half of 2017" and this trend extended

into September. Like the last two months September's headline number sat below

than the average set the first half of the year.  

     Despite a sustained rise in service sector output, domestic demand acted as

a drag on activity growth, according to IHS Markit, with the balance of incoming

new orders slowing to the slowest rate in 13 months.

     Businesses also reported persistent inflationary pressures, with elevated

operating costs forcing factory gate prices to their highest level since August.

     Looking at the year ahead, firms were less optimistic about their

prospective fortunes. 

     The net balance of firms expecting a rise in activity over the next 12

months was the lowest since June meaning this measure of confidence remained

close to the weak levels set at the end of 2011. Firms continued to cite "the

wider economic outlook and the prospect of continued political uncertainty

ahead" as the sources of their anxiety. 

     Employment sentiment, however, remained high in September, with the rate of

job creation moderating only slightly from August's 19-month high. That said,

firms reported that they had increased unfilled vacancies and that they found it

difficult to recruit skilled workers.  

     Wednesday's services survey showing follows moderations witnessed in both

its manufacturing and construction sister surveys. The manufacturing PMI slipped

marginally to 55.9 while the construction PMI dipped back into contraction

territory for the first time in thirteen months, falling to 48.1.    

     "The three PMI surveys put the economy on course for another subdued 0.3%

expansion in the third quarter, but the fourth quarter could see even slower

growth," Chris Williamson, Senior Economist at IHS Markit, said.

     "The surveys therefore portray an economy struggling with the unwelcome

combination of sluggish growth and rising prices, presenting a dilemma for

policymakers," he added.  

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

--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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