The UK service sector expanded at the strongest pace in six months in October, largely driven by improved order books and client demand, survey data from IHS Markit showed Friday.
The IHS Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index rose unexpectedly to 55.6 in October from 53.6 in September. The reading was expected to drop to 53.3.
The expansion was supported by improved order books and resilient client demand in October. New orders grew the most since May after growth eased to a 13-month low in September.
However, data pointed to slower employment growth across the service sector, despite the rebound in business activity and incoming new work. The latest increase in payroll numbers was the weakest since March.
Service providers were cautious about future workloads, with business optimism well below its long-run trend and still softer than seen on average in the first half of 2017, the survey showed.
The main source of longer-term anxiety continued to be the path of Brexit, Duncan Brock, director of customer relationships at the CIPS, said.
Input prices continued to increase notably in October and were linked to a variety of expenses. Nonetheless, the overall input cost inflation eased to its lowest in over a year.
Meanwhile, prices charged inflation continued to rise, reaching a six-month high.
The PMI data point to the economy growing at a quarterly rate of 0.5 percent, representing an encouragingly solid start to the fourth quarter, Chris Williamson, chief business economist at IHS Markit, said.
While an upturn in business activity growth adds some justification to the Bank of England's decision to hike interest rates for the first time in a decade, a deeper dive into the numbers highlights the fragility of the economy and points to downside risks for the outlook, Chris Williamson, the chief business economist at IHS Markit, said.
On Thursday, the BoE had lifted its interest rate for the first time in a decade despite uncertainties stemming from Brexit. The bank forecast the economy to expand at about 1.7 percent each over the next three years.
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