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Joint-weakest rise in new UK business since October 2017

Staff Writer |
January data signalled a further upturn in business activity across the service sector.

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The rise in output was the slowest for four months, amid one of the softest increases in new business seen for more than a year.

Although only fractional, new export orders fell for the second successive month.

In line with a slower rise in new business, employment growth eased to the second-weakest since June 2017.

However, firms registered a stronger degree of confidence towards business activity levels over the coming 12 months.

The seasonally adjusted final IHS Markit U.S.

Services Business Activity Index registered 54.2 in January, down slightly from 54.4 in December.

Anecdotal evidence linked the solid rise in business activity to a sustained increase in new orders and greater client demand.

That said, the rate of expansion was the softest for four months and weaker than both the series trend and the average seen in 2018.

New business received by service providers continued to increase at a solid rate, and one that matched that seen in December.

The upturn was, however, the joint-slowest since October 2017.

Where a rise was reported, panellists often attributed this to the release of new product lines and solid domestic demand.

Others, meanwhile, suggested client demand growth remained subdued in comparison to the first half of 2018.

Service sector firms noted a decrease in foreign client demand in January, signalling the second successive month the respective seasonally adjusted index has posted below the 50.0 no change mark.

The decline in new business from abroad was only fractional but was the third fall in the past six months.

Meanwhile, price pressures eased in January, with the rate of input price inflation softening to a 22-month low.

The increase in cost burdens was also slower than the series trend but solid overall.

Panellists stated that higher input prices were linked to greater raw material and wage costs.

However, others noted that lower fuel prices had led to reduced cost pressures.

Firms were able to pass on higher input costs to clients through greater output charges in January.

The rate of charge inflation picked up from December's 12-month low, albeit remaining well below last year's peaks.

Alongside reports of the need to pass on higher costs, a number of panellists suggested they were able to increase their operating margins.

January data signalled a renewed accumulation in backlogs of work at service providers.

That said, a softer expansion in new work resulted in a weaker rate of job creation.

Employment growth was the second-slowest since June 2017 (behind November 2018).

Business activity expectations picked up in January, with the degree of optimism rising since December.

Panellists noted that positive sentiment stemmed from hopes of more favourable demand conditions, however, the level of confidence was still historically subdued.

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