British service sector growth slips to 11-month low
Staff Writer |
UK service providers recorded solid rises in business activity and incoming new work during August, but rates of growth eased since July and remained notably weaker than seen on average in the first half of 2017.
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The latest survey also pointed to stronger cost pressures across the service sector, with the rate of input price inflation the fastest since February.
Higher staff costs, fuel bills and prices for imported items contributed to another solid increase in average prices charged by service providers in August.
At 53.2 in August, the headline seasonally adjusted IHS Markit/CIPS Services PMI® Business Activity Index registered above the 50.0 nochange value for the thirteenth consecutive month.
However, the index dropped from 53.8 in July and signalled the slowest pace of business activity expansion since September 2016.
Survey respondents noted that subdued client demand and heightened uncertainty about the domestic economic outlook had weighed on business activity growth in August.
Reflecting this, new order volumes increased at the secondslowest rate since September 2016.
A number of service providers commented that fragile business confidence had led to delayed spending decisions among clients.
Despite a slowdown in new business growth in August, the latest survey data highlighted renewed pressures on operating capacity across the service economy.
This was highlighted by the steepest rise in backlogs of work since July 2015.
Service providers responded to rising workloads and pressures on operating capacity by recruiting additional staff in August.
The rate of job creation accelerated for the third month running to its strongest since the start of 2016.
August data pointed to a sharp increase in average cost burdens at service sector companies.
The rate of input price inflation picked up further from May’s recent low and was the fastest for six months.
Some firms also suggested that recent exchange rate depreciation against the euro would likely drive up costs in the near-term.
Higher operating expenses placed pressure on firms to increase their average prices charged in August.
The latest rise in service sector charges was the fastest since April.
Meanwhile, latest data revealed that service providers’ business confidence edged up to a threemonth high, but remained subdued in comparison to those seen prior to the EU referendum last summer.
Companies expecting a rise in business activity over the next 12 months generally cited organic growth, resilient client spending and new product launches.
However, there were again reports that Brexit-related uncertainty continued to undermine business confidence. ■