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UK service sector ends 2016 with strong expansion

Staff Writer |
The final batch of UK PMI survey data for 2016 from IHS Markit and CIPS signalled that the dominant UK service sector expanded sharply in December, rounding off the strongest quarter of the year.

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The rate of expansion of activity accelerated for the third month running to the sharpest since July 2015, fuelled by stronger growth in new work.

Employment rose at a pace unchanged from November’s seven-month high, and sentiment towards the 12-month outlook strengthened despite ongoing uncertainty regarding Brexit and European elections.

The survey data also signalled that inflationary pressures in the sector remained substantial, with prices charged rising at the strongest rate since April 2011.

The survey’s headline figure is the seasonally adjusted Markit/CIPS Services PMI Business Activity Index, 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 Index remained above 50.0 for the fifth consecutive month in December, indicating a continued recovery in growth following a contraction in July linked to the EU referendum. Moreover, the Index rose for the third consecutive month to 56.2, from 55.2, signalling the fastest expansion since July 2015.

The rate of growth was also sharper than the 20-year long-run survey average. December data signalled a boost to new business growth. The overall increase was the strongest since July 2015.

Anecdotal evidence linked new business wins to marketing, new product launches, government contracts, export business, new accounts and mergers/acquisitions.

Meanwhile, the volume of outstanding business increased for the fourth time in five months.