U.K. service sector activity growth eases in October to weakest since March

Service providers in the U.K. hinted at another rise in business activity in October; however, the growth pace slowed to its weakest since the snow-related weak patch recorded in March. The seasonally adjusted IHS Markit U.K. services PMI Business Activity Index fell from September’s 53.9 to 52.2 in October. Survey respondents marked that increased uncertainty regarding economy and a weak patch for new work held back business activity growth.

New business growth eased for the third time in the last four months. Furthermore, the latest increase in new work was modest and the softest seen since July 2016. Several companies recorded that Brexit-related uncertainty and worries regarding the global economic outlook had restrained demand growth for business services. Some survey respondents commented on weak consumer spending in October. Consumer-facing sectors such as restaurants, hotels and leisure recorded the most subdued performance.

Slower new business growth aided in easing pressure on operating capacity in October. This was underlined by a decline in backlogs of work for the first time since April. In the meantime, a moderate pace of job creation continues throughout the service sector. Anecdotal evidence implied that a lack of suitably skilled candidates to fill vacancies had held back growth in employment.

The latest data indicates towards another surge in input prices, which was mainly attributed to increased transport costs and rising staff wages. Survey respondents also cited rising prices for items sourced from abroad, which was attributed to the soft sterling exchange rate. Increased operating expenses led to the most rapid rise in prices charged by service sector companies since June.

Looking ahead, the latest survey showed an easing in sentiment regarding the outlook for business activity growth. The degree of positive sentiment about the year ahead was the softest since July 2016. While some companies recorded improved optimism on the basis that business investment and client confidence would possibly pick up in response to clarity about Brexit outcomes, many others saw a deepening malaise due to Brexit-related disruptions and broader worries regarding the general economic outlook.

At 11:00 GMT the FxWirePro's Hourly Strength Index of British Pound was highly bullish at 169.28, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -67.3638. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex