UK Service Sector Logs Stronger Upturn In August
September 05 2018 - 04:36AM
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UK services sector expanded at a faster pace in August, largely
driven by stronger new orders, despite the Brexit uncertainty,
survey data from IHS Markit showed Wednesday.
The IHS Markit/Chartered Institute of Procurement & Supply
services Purchasing Managers' Index rose more-than-expected to 54.3
from 53.5 in July, reaching its second-highest level since
February.
The expected score was 53.9. The index has remained above the
neutral 50.0 no-change mark in each month since August 2016.
Ruth Gregory, an economist at Capital Economics, said the survey
provides reassurance that the rebound in GDP growth in the second
quarter has been sustained in the third quarter so far. Despite
this, the chances of an interest rate hike at next week's Bank of
England meeting are extremely slim.
"Given our assumption that a Brexit deal will only be secured at
the eleventh hour, we don't expect the MPC to raise rates again
until May 2019, after the UK has left the EU," the economist
added.
"In summary, though the sector remained in positive territory,
the dark clouds of political indecision are still having an effect
and preventing more business activity," Duncan Brock, group
director at the CIPS, said.
"Service providers are likely to continue along this vein for
the rest of the year until those clouds have cleared," Brock
added.
New work growth picked up slightly since July, but was still
softer than the trend since the current phase of expansion started
in August 2016.
The rate of job creation was the fastest since February,
reflecting efforts to boost business capacity and meet increased
workloads. Difficulties recruiting suitable skilled staff
contributed to higher salary payments.
Despite a sharp and accelerated rise in average cost burdens,
intense competitive pressures meant that prices charged inflation
was only moderate and remained well below the peak seen in November
2017.
However, optimism towards the year-ahead business outlook hit
five-month low in August. Brexit uncertainty had a near-term impact
on clients' business investment plans.
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