U.K. service business activity sees most rapid growth for eight months in June, PMI index rises to 55.1

Service providers in the U.K. indicated the most rapid growth of business activity for eight months in June, which continued the rebound in growth seen since March’s snow-related disruption. The seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index rose to 55.1 in June from May’s 54. Furthermore, the latest reading hinted at the strongest pace of growth since October 2017. Survey respondents commented on a general upturn in client demand, especially for business and financial services. There were also reports that unusually favourable weather conditions had stimulated consumer spending.

The latest data showed a strong and accelerated rise in new work received by service providers. The pace of new business growth was the most rapid for just over one year, which survey respondents linked to successful product launches, new marketing initiatives and rebounding economic conditions. However, there were reports that Brexit related uncertainty had held back business investment, especially in relation to spending by large corporate clients.

Stronger overall demand placed pressure on operating capacity at service sector companies in June. Reflecting this, latest data indicated towards the largest rise in backlogs of work since July 2015. Anecdotal evidence implied that stronger-than-expected sales growth and difficulties recruiting additional staff had been factors leading to rising volumes of incomplete work.

Employment figures rose just modestly in June, with the pace of job creation holding close to the 13-month low witnessed in April. While survey respondents mainly commented on attempts to stimulate business capacity, there were also some reports that tight labor market conditions and squeezed margins had led to the non-replacement of voluntary leavers.

June data hinted at a sharp and accelerated rise in average cost burdens. Service providers noted greater fuel bills and staff salaries in the latest survey period. Increased operating expenses resulted in the most rapid pace of prices charged inflation since March. In some instances, service sector companies commented that high levels of capacity utilization had provided an additional reason to pass on greater costs to new clients.

At 15:00 GMT the FxWirePro's Hourly Strength Index of British Pound was bullish at 77.4199, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -47.4262. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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