UK service sector continues to recover from Brexit
Business activity rose for the second month running, following a sharp drop in July linked to uncertainty surrounding the UK’s vote to leave the European Union.
Moreover, new business rose at the fastest pace since February and the rate of job creation picked up. However, future expectations remained very low by historical standards and the survey recorded the sharpest increase in service sector input prices in over three-and-a-half years.
The survey’s headline figure is the seasonally adjusted Markit/CIPS Services Business Activity PMI, a single-figure measure designed to track changes in total activity. Readings above 50.0 signal growth compared with the previous month, and below 50.0 contraction.
The Business Activity Index remained above the no-change mark of 50.0 in September, at 52.6, signalling growth of UK services output. Down slightly from 52.9 in August, the latest figure indicated a further moderate rate of expansion at the end of the third quarter, following a contraction in July in the wake of the EU referendum.
The rate of expansion in the latest period was weak in the context of historical data, however, with the Index below its long-run level of 55.1. The Index averaged 50.9 over Q3 as a whole, the lowest since Q4 2012.
The survey data signalled a strengthening trend in new business inflows, as companies reported new opportunities and customer enquiries, rising demand from overseas clients linked to the weak pound sterling and client confidence recovering after the initial Brexit vote shock.
New business rose at the fastest pace since February, albeit with the rate of increase remaining below the long-run survey average. ■