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UK services up in December, manufacturing down

Staff Writer |
The IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) increased from 53.8 in November to 54.2 in December.

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As a result, the indicator remained comfortably above the 50-point threshold that separates expansion from contraction in the services sector, where it has now been for 17 consecutive months.

December’s figure was driven by a sharper rise in business activity compared to the prior month. However, growth in new orders softened, which led to a consequent slowdown in the rate of hiring.

More sluggish new order growth also lessened the pressure on operating capacity, as backlogs of work fell. On the price side, input price inflation reached the highest level in over a year, with firms reporting higher prices for fuel, utilities, food and salaries.

In contrast to the evolution of the services sector, the IHS Markit/CIPS manufacturing PMI decreased from a multi-year high of 58.2 in November to 56.3 in December.

However, the index remains well above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been since August 2016.

December’s slight decline was driven by slower growth in output, new orders and employment, although all three expansions were solid and above long-run trends.

The slowdown in output growth was driven by a smaller increase in consumers goods, which more than offset faster increases in intermediary and investment goods. New export orders grew robustly, aided by greater demand from the U.S, China, the Middle East and Europe.

On the price front, input price inflation was high in December, despite easing to a four-month low. As a result, output prices rose as firms looked to pass on increased costs to consumers.

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