UK Service Sector Stabilizes In December

ukpmi aug03 06jan20

The UK service sector stabilized at the end of the year, underpinned by a faster growth in new orders, survey results showed Monday.

The final IHS Markit/ Chartered Institute of Procurement & Supply services Purchasing Managers' Index improved to the neutral level of 50.0 from 49.3 a month ago. The reading was also above its flash of 49.0.

The stabilization of the service sector output was helped by a return to improving demand as new orders grew the most since last July.

Nonetheless, the domestic political uncertainty in the run up to the general election was the main factor weighing on new orders. Export sales slid for the fourth straight month.

Business optimism rebounded to the highest since September 2018 as service providers were hopeful that a more stable political backdrop will help to support business conditions.

Further, the improvement in business confidence lifted staffing levels. The latest upturn in employment was the fastest for five months.

Data signaled a strong increase in average cost burdens, with the rate of inflation picking up from the 39-month low seen in November. However, output price inflation eased to its weakest since February 2016.

The modest rebound in new work provides another signal that business conditions should begin to improve in the coming months, helped by a boost to business sentiment from greater Brexit clarity and a more predictable political landscape, Tim Moore, economics associate director at IHS Markit, said.

The survey showed that a stabilization of service sector activity was offset by a sharp and accelerated decline in manufacturing output.

The composite output index held steady at 49.3 in December. The latest reading was the joint-lowest since July 2016. However, the score was above the flash 48.5.

Capital Economics' economist Thomas Pugh said, "While it is probably too early to say that the worst is behind us, especially with the threat of something like a no deal Brexit at the end of the year, a boost in sentiment should support economic activity in the first half of 2020."

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