Ser­vices sec­tor hits a seven-month low amid un­cer­tainty over Brexit

Belfast Telegraph - Business Telegraph - - News - BY STAFF RE­PORTER

OUT­PUT in Bri­tain’s dom­i­nant ser­vices sec­tor slumped to a seven-month low in Oc­to­ber as Brexit un­cer­tainty con­tin­ues to drag on the econ­omy.

The closely-watched Markit/ CIPS ser­vices pur­chas­ing man­agers’ in­dex (PMI) showed a read­ing of 52.2 in Oc­to­ber, down from 53.9 in Septem­ber.

A read­ing above 50 in­di­cates growth, but econ­o­mists had been ex­pect­ing a read­ing of 53.3.

It was the weak­est rate of ex­pan­sion since March, when the Beast from the East sent a chill over the sec­tor, and the sec­ond low­est since July 2016.

Chris Wil­liamson, chief busi­ness econ­o­mist at IHS Markit, which com­piles the sur­vey, said: “The dis­ap­point­ing ser­vices sec­tor num­bers bring mount­ing ev­i­dence that Brexit wor­ries are tak­ing an in­creas­ing toll on the econ­omy.

“Com­bined with the man­u­fac­tur­ing and con­struc­tion sur­veys, the Oc­to­ber ser­vices PMI points to the econ­omy grow­ing at a quar­terly rate of just 0.2%, set­ting the scene for GDP growth to weaken sharply in the fourth quar­ter.”

Con­sumer-fac­ing sec­tors such as ho­tels, restau­rants and leisure re­ported the weak­est per­for­mance.

Oc­to­ber’s data also pointed to an­other sharp in­crease in in­put prices, which was mainly linked to higher trans­port costs and ris­ing staff wages, IHS said. Sur­vey re­spon­dents also cited in­creas­ing prices for items sourced from abroad, which was linked to the weak pound.

The poor show­ing from ser­vices fol­lows equally lack­lus­tre fig­ures from man­u­fac­tur­ing and con­struc­tion last week.

“How­ever, while it is not sur­pris­ing to see that Brexit un­cer­tain­ties are in­creas­ingly un­der­min­ing busi­ness ac­tiv­ity at this stage of the ne­go­ti­a­tions, the sur­vey re­sponses also sug­gest that the econ­omy is fac­ing other head­winds, in­clud­ing a broader global slow­down, trade wars, height­ened geopo­lit­i­cal un­cer­tainty and tight­en­ing fi­nan­cial mar­ket con­di­tions,” Mr Wil­liamson added.

Ster­ling was down 0.4% ver­sus the US dol­lar at 1.29 fol­low­ing the news. Ver­sus the euro, the pound was down 0.25% at 1.14.

Mean­while, the ser­vices pur­chas­ing man­agers’ in­dex (PMI) for the Repub­lic said growth in the ser­vices sec­tor also eased to a seven month low dur­ing Oc­to­ber, amid a slow­down in the rate of ex­pan­sion in new or­ders and strong in­fla­tion­ary pres­sures.

It fol­lows last week’s man­u­fac­tur­ing data which showed that man­u­fac­tur­ing out­put in the Repub­lic also in­creased at the slow­est pace in seven months in Oc­to­ber.

The Repub­lic’s PMI was posted at 57.2 in Oc­to­ber, down from 58.7 in Septem­ber. Any read­ing over 50 is deemed growth, there­fore the data still sig­nalled a sub­stan­tial monthly in­crease in ac­tiv­ity across the Ir­ish ser­vice sec­tor.

Vol­umes of new work from abroad con­tin­ued to in­crease strongly, al­beit at a slower pace than in Septem­ber.

Pan­el­lists com­mented on in­creased or­ders from the UK and greater over­seas or­ders.

Job cre­ation in the sec­tor picked up to a 10-month high, with anec­do­tal ev­i­dence from pan­el­lists in­di­cat­ing that an in­creased level of cus­tomer or­ders and in­vest­ment en­cour­aged them to hire ad­di­tional staff.

Both in­put prices and out­put charges in­creased at quicker rates dur­ing Oc­to­ber.

Firms re­ported pass­ing on in­creased busi­ness costs such as in­sur­ance rates to cus­tomers.

Look­ing ahead, ser­vice providers were op­ti­mistic about ac­tiv­ity over the com­ing year.

Ex­pec­ta­tions of in­creased cus­tomer or­ders as well as an im­prov­ing Ir­ish econ­omy were stated as rea­sons be­hind op­ti­mism. Con­fi­dence was broadly in line with that seen in Septem­ber, the re­port found.

The econ­omy is fac­ing other head­winds such as a broader global slow­down

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