Continued strength of UK service sector in Nov signals robust Q4 despite ongoing Brexit uncertainty

UK services sector activity in the month of November surprised to the upside, report published by Markit Economics showed on Monday. UK services PMI accelerated its pace of expansion to 55.2 in November from a reading of 54.5 in the previous month. Data marked the highest levels in ten-months and beat market expectations for a drop to 54.2.

UK service sector remained on a firm growth path towards the end of 2016 following a contraction in July linked to the EU referendum. Upbeat services sector PMI shows that the pace of UK economic growth remains resiliently robust in the fourth quarter, despite ongoing uncertainty caused by Brexit.

Weak pound likely boosted international demand, while firms also reported marketing efforts and new products.  Input price inflation remained sharp in November despite easing for the first time since May, and a similar trend was evident for prices charged by service providers.

Employment growth picked up to the fastest since April, as growth of both new business and outstanding contracts encouraged service providers to take on more staff in November. However, the strength of long-term business sentiment weakened for the first time since July, on account of ongoing political uncertainty and inflationary pressures.

“The three PMI surveys collectively indicate that the economy will grow by 0.5% in the fourth quarter. The sustained improvement in the business surveys and sharp rise in prices suggest that the odds will continue to shift away from the Bank of England adding more stimulus." said Chris Williamson, Chief Business Economist at IHS Markit.

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