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UK services PMI rises unexpectedly in Oct, outlook weakens
inspector_monkfish
Posts: 9,276 Forumite
09:28 03Nov10 UK OCT SERVICES PMI INDEX RISES TO 53.2 FROM 52.8 (REUTERS POLL 52.5), HIGHEST SINCE JUNE
09:28 03Nov10 UK OCT SERVICES PMI PRICES CHARGED INDEX RISES TO 51.7 FROM 49.9, HIGHEST SINCE SEPT 2008
09:28 03Nov10 UK OCT SERVICES PMI BUSINESS EXPECTATIONS INDEX FALLS ON WORRIES ABOUT GOVT SPENDING CUTS
09:28 03Nov10 POLL- UK services PMI rises unexpectedly in Oct, outlook weakens
* Services PMI hits highest level since June
* Outlook weakens as companies cut jobs
* PMI supports expectations of no BoE easing this week
LONDON, Nov 3 - Activity in Britain's services sector unexpectedly gathered pace in October, but companies cut jobs and expectations for the year ahead fell back towards their June low on worries about the impact of government spending cuts.
The figures are likely to support expectations that the Bank of England will vote not to inject more stimulus into the economy this week but leave that option open further down the line if the economy worsens.
The headline business activity index in the Markit/CIPS PMI index rose to 53.2 last month from 52.8 in September, the highest reading since June and confounding forecasts for a dip to 52.5.
The improvement was led by a rise in new business, although the expectations index fell a full point and the employment index slipped back below the 50-level that separates expansion from contraction as firms braced for tough conditions ahead.
"On both output and new orders measures, rates of expansion remain soft compared to long-run averages, as companies continue to digest the true effects on the economy of the coalition government's Comprehensive Spending Review," said Paul Smith, senior economist at Markit.
"The latest data therefore suggest that the sector is set to make a below-par contribution to GDP in the coming months."
Nonetheless, BoE policymakers are also likely to be concerned by news of growing inflation pressures in the services sector, with firms ramping up their prices at the fastest pace in two years in response to increases in energy and wage costs.
Wednesday's PMI data, which covers firms that make up around 40 percent of GDP, came after an unexpectedly robust survey of manufacturing activity and surprisingly weak construction PMI data this week. On balance, the figures suggest Britain's economy made a solid start to the final quarter of this year.
However, the survey also showed that companies remain cautious about the outlook and want to see how the 80 billion pounds ($129 billion) of spending cuts laid out by the government last month will affect people's spending decisions.
"A number of respondents reported the deferral of client spending, reflecting continued uncertainty over the impact of government spending cuts on the economy," Markit said.
"Such concerns again dominated service providers' expectations, with business confidence remaining historically subdued."
The business expectations index fell a full point from 66.2 in September.
SPENDING AXED
Finance minister George Osborne's Comprehensive Spending Review detailed plans to slash departmental budgets by around 19 percent as the government seeks to eliminate a budget deficit of around 11 percent of GDP over the next four years.
Private companies who have government contracts are likely to be hit hard, while deep cuts to welfare spending along with a 2.5 percentage point rise in value-added tax from January will squeeze household budgets.
Markit said that firms had been cutting staff in anticipation of tougher times to come, particularly in the 'personal services' sector, which includes firms such as beauty salons.
It also said that price rises in response to higher input costs had been in line with their historic trend, and that competition had limited the extent of any gains.
The hotel and restaurant sector in particular said it had been hit hard by a 2.2 percent rise in the minimum wage and higher food prices.
09:28 03Nov10 UK OCT SERVICES PMI PRICES CHARGED INDEX RISES TO 51.7 FROM 49.9, HIGHEST SINCE SEPT 2008
09:28 03Nov10 UK OCT SERVICES PMI BUSINESS EXPECTATIONS INDEX FALLS ON WORRIES ABOUT GOVT SPENDING CUTS
09:28 03Nov10 POLL- UK services PMI rises unexpectedly in Oct, outlook weakens
* Services PMI hits highest level since June
* Outlook weakens as companies cut jobs
* PMI supports expectations of no BoE easing this week
LONDON, Nov 3 - Activity in Britain's services sector unexpectedly gathered pace in October, but companies cut jobs and expectations for the year ahead fell back towards their June low on worries about the impact of government spending cuts.
The figures are likely to support expectations that the Bank of England will vote not to inject more stimulus into the economy this week but leave that option open further down the line if the economy worsens.
The headline business activity index in the Markit/CIPS PMI index rose to 53.2 last month from 52.8 in September, the highest reading since June and confounding forecasts for a dip to 52.5.
The improvement was led by a rise in new business, although the expectations index fell a full point and the employment index slipped back below the 50-level that separates expansion from contraction as firms braced for tough conditions ahead.
"On both output and new orders measures, rates of expansion remain soft compared to long-run averages, as companies continue to digest the true effects on the economy of the coalition government's Comprehensive Spending Review," said Paul Smith, senior economist at Markit.
"The latest data therefore suggest that the sector is set to make a below-par contribution to GDP in the coming months."
Nonetheless, BoE policymakers are also likely to be concerned by news of growing inflation pressures in the services sector, with firms ramping up their prices at the fastest pace in two years in response to increases in energy and wage costs.
Wednesday's PMI data, which covers firms that make up around 40 percent of GDP, came after an unexpectedly robust survey of manufacturing activity and surprisingly weak construction PMI data this week. On balance, the figures suggest Britain's economy made a solid start to the final quarter of this year.
However, the survey also showed that companies remain cautious about the outlook and want to see how the 80 billion pounds ($129 billion) of spending cuts laid out by the government last month will affect people's spending decisions.
"A number of respondents reported the deferral of client spending, reflecting continued uncertainty over the impact of government spending cuts on the economy," Markit said.
"Such concerns again dominated service providers' expectations, with business confidence remaining historically subdued."
The business expectations index fell a full point from 66.2 in September.
SPENDING AXED
Finance minister George Osborne's Comprehensive Spending Review detailed plans to slash departmental budgets by around 19 percent as the government seeks to eliminate a budget deficit of around 11 percent of GDP over the next four years.
Private companies who have government contracts are likely to be hit hard, while deep cuts to welfare spending along with a 2.5 percentage point rise in value-added tax from January will squeeze household budgets.
Markit said that firms had been cutting staff in anticipation of tougher times to come, particularly in the 'personal services' sector, which includes firms such as beauty salons.
It also said that price rises in response to higher input costs had been in line with their historic trend, and that competition had limited the extent of any gains.
The hotel and restaurant sector in particular said it had been hit hard by a 2.2 percent rise in the minimum wage and higher food prices.
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0
Comments
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Service industries could see some first signs of a downward trend, reading this.
I mean, if people start personal belt tightening, then they'll stop popping out for a coffee, and will take in a packed lunch to work instead of popping out & getting something.
Passing trade could start falling for small "luxuries" or personal treats.
Interesting that they've cut forecasts.It's getting harder & harder to keep the government in the manner to which they have become accustomed.0
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