UK service sector growth accelerates in November, Markit says

The UK services sector brushed aside the uncertainty surrounding emerging markets as orders for new work picked up, helping to offset weakness in construction and manufacturing, the results from a widely-followed survey showed.

Markit’s service sector purchasing managers’ index jumped to a reading 55.9 points for November, up from the prior month’s print of 54.9 (consensus: 55.0).

Chris Williamson, Chief Economist at Markit, highlighted the resilience of hiring – despite widespread difficulties in finding new staff and concerns about the impact of the National Living Wage – which in turn led to reports of rising wages.

“For now, falling oil and energy costs are offsetting rising wage growth and keeping a lid on inflationary pressures, but the upturn in earnings growth raises question marks over just how long inflation, and therefore interest rates, will remain low for,” Williamson added.

The rate of inflation rose but remained weaker than the long-run survey average, Markit said.

Orders for new business accelerated to a four-month high, with new contracts linked to improving confidence, marketing efforts, new product launches and acquisitions.

However, the volume of work outstanding continued to increase only marginally – signalling of lack of pressures on capacity.

The rate of inflation rose but remained weaker than the long-run survey average, Markit said.

Job growth slowed to a three-month low but remained at historically high levels, the survey compiler said.

Service providers’ expectations for future levels of activity remained at October’s two-and-a-half year lows.

So far the survey data were pointing to a rate of growth in gross domestic product of 0.6% in the fourth quarter, Williamson said.

"Although today’s upside surprise is welcomed, caution is nonetheless required. The underlying categories provide a more mixed message and, nonetheless, there still exists notable declines on an October/November average relative to Q3 basis, notably in services’ new business and business expectations. Hence it does not change our cautious macro view on economic activity," Barclays's Andrzej Szczepaniak and Francois Cabau wrote in a research note sent to clients after the release of the survey results.