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UK Services Growth Moderates On Economic Uncertainty, Weak Orders

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The UK service sector registered its slowest rate of expansion in seven months in October, survey results from IHS Markit and the Chartered Institute of Procurement & Supply showed Monday.

The services Purchasing Managers' Index dropped more-than-expected to 52.2 in October from 53.9 in September. The expected level was 53.4.

Although the headline index has remained above the 50.0 no-change value in each of the past 27 months, the latest reading was the second lowest since July 2016.

Respondents cited that heightened economic uncertainty and a soft patch for new work held back business activity growth.

New business growth moderated for the third time in the past four months. Moreover, the latest expansion was the weakest since July 2016 as Brexit-related uncertainty and concerns about the global economic outlook constrained demand growth.

A moderate growth of job creation continued across the service sector. Service providers reported a lack of suitably skilled candidates to fill vacancies.

October data pointed to another sharp increase in input prices in October. Higher operating expenses led to the fastest rise in prices charged by service sector firms since June.

The degree of positive sentiment about the future business activity was the weakest since July 2016.

Chris Williamson, chief business economist at IHS Markit, said PMI surveys point to the economy growing at a quarterly rate of just 0.2 percent, setting the scene for GDP growth to weaken sharply in the fourth quarter.

Although growth looks set to slow in the fourth quarter, Andrew Wishart, an economist at Capital Economics said he is upbeat on the prospects for next year.

So long as a Brexit deal is agreed, a rebound in investment, an acceleration in real wage growth, and supportive fiscal policy could see GDP growth accelerate to just over 2 percent, the economist noted.

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