Expert opinion piece
With all the Bank of England hubbub yesterday, a number of other key economic announcements seem to have gone under the radar somewhat.
The UK service sector saw its best performance for six months in October, with the latest IHS Markit/CIPS Services (PMI) increasing from 53.6 to 55.6 after a disappointing month in September. This comes after the UK manufacturing sector beat expectations with its growth results earlier this week, and UK construction, while still struggling, showed improvement on a poor month previously.
The latest services figures demonstrate the fastest rate of growth since April 2017, with improved orders and continued customer demand. Input inflation costs also slowed to the lowest for just over a year. This marks a positive move in the right direction and, along with other encouraging sector data, perhaps offers additional confidence in the UK economy.
New orders continued to increase at a robust pace and new work has grown at the quickest rate for six months, thanks to improving demand domestically and new product launches in the sector. Efficiencies gained in operating expenses appear to have offset some of the input costs, although input prices continue to grow — albeit at a slower pace than the rises seen in September — as transport, food and energy prices increase, alongside increasing salary pressures.
Jobs growth is slower across the sector, however, reflecting a more cautious approach to new hires and steps to relieve pressures on the bottom line with a more long-term outlook, given uncertainty around Brexit and economic policy.
David Johnson, founding director of currency specialist, Halo Financial, commented on the report,”This is encouraging news after the worrying results that made markets jittery last month. The service sector seems to be adapting to difficult conditions and taking steps to combat inflationary pressures by looking at operational savings. However, costs are still going up.”
“Add to that the potential for consumers to rein in spending now that interest rates have increased, and it will be interesting to see how the sector performs in November and the run up to the festive season. In times of economic uncertainty with Brexit on the horizon; and while currency markets are highly volatile, companies need to assess their longer term strategy, plan for the challenges that lie ahead and look at ways to both protect and maximise margins.”