Bri­tish ser­vices PMI hits 10-month high

Kuwait Times - - BUSINESS -

Busi­nesses in Bri­tain’s dom­i­nant ser­vices sec­tor grew at their fastest pace since Jan­uary last month and the broader econ­omy main­tained mo­men­tum, even if firms have some wor­ries about the year ahead, a sur­vey showed yes­ter­day. The Markit/CIPS ser­vices pur­chas­ing man­agers’ in­dex (PMI) - a closely watched gauge of the ser­vices sec­tor rose to 55.2 in Novem­ber from 54.5 in Oc­to­ber, beat­ing all the fore­casts in a Reuters poll of econ­o­mists.

How­ever, busi­nesses re­ported the sec­ond-weak­est level of op­ti­mism about the fu­ture in four years, due to the un­ex­pected re­sult of the US pres­i­den­tial elec­tion, the value of ster­ling and on­go­ing un­cer­tainty about how Bri­tain will leave the Euro­pean Union. De­spite a dip in the equiv­a­lent sur­vey of man­u­fac­tur­ers pub­lished last week, over­all the Novem­ber PMIs sug­gest the econ­omy as a whole will main­tain the third quar­ter’s solid 0.5 per­cent growth rate through to the end of the year, Markit said.

“The pace of UK eco­nomic growth re­mains re­siliently ro­bust in the fourth quar­ter, de­spite on­go­ing un­cer­tainty caused by Brexit,” said Chris Wil­liamson, chief busi­ness econ­o­mist at IHS Markit, the com­pany that com­piles the sur­vey. Most econ­o­mists and the Bank of Eng­land said Bri­tain’s econ­omy would slow sharply af­ter June’s vote to leave the EU. But strong con­sumer de­mand and a boost to ex­porters from the heavy postre­f­er­en­dum fall in ster­ling have kept growth go­ing.

A sep­a­rate sur­vey by man­u­fac­tur­ing lobby EEF re­leased ear­lier on Mon­day showed a boost in new or­ders and a bet­ter-than-ex­pected re­cov­ery in out­put.

Last month the Bank of Eng­land re­vised up its fore­casts to pen­cil in 0.4 per­cent growth for the last three months of 2016. But it also said an­nual growth would slow to 1.4 per­cent next year from 2.2 per­cent in 2016 as higher in­fla­tion squeezes house­hold in­comes.

“El­e­vated price pres­sures and drop in ex­pec­ta­tions sug­gest that a slow­down re­mains on the cards for next year,” HSBC econ­o­mist El­iz­a­beth Martins said. “In­fla­tion is likely to out­pace wage growth over the com­ing year or so, bear­ing down on do­mes­tic de­mand and caus­ing growth to slow.”

Busi­nesses are al­ready start­ing to feel the pinch of costlier im­ports due to the fall in ster­ling, and Markit said busi­ness costs had risen by the most in five-and-ahalf years dur­ing the past two months.

“These higher costs will in­evitably feed through to con­sumers in the form of higher prices,” Wil­liamson said. The BoE fore­casts in­fla­tion will surge to 2.7 per­cent next year from 0.9 per­cent in the most re­cent data, and many pri­vate-sec­tor econ­o­mists think it could rise even faster. — Reuters

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