U.K. services activity grows in December, headline PMI index rises to 54.2

Business activity growth picks up throughout U.K service sector in December. The headline services PMI index rose from November’s 53.8 to 54.2 in December, coming in slightly below consensus expectations of 54. However, delving into details, the headline number masks some less-positive news. The flow of new business orders decelerated, with the index falling to 53 from 53.9. Meanwhile, a measure of outstanding work moved below 50. Less new business and declining backlogs of work might be a drag in the coming months, noted Lloyds Bank in a research report.

Some service sector companies also emphasized that Brexit-related uncertainty continued to hold back clients’ willingness to spend at the end of 2017. However, there were also some more positive indications. Expectations regarding the future rose in December, with the rise attributed to new product launches and stronger global economic conditions. Cost rises were reported, partially linked to higher salaries, while higher food and energy costs were also recorded. But, stronger competition for new work signified that companies’ ability to pass on higher expenses were restricted.

Still, with the rise in December’s report countering the fall in sentiment in other areas of the U.K economy, he composite rose to 54.9 from a downwardly revised 54.8 in November. The average reading for services PMI in the fourth quarter rose to 54.5 from 53.5 in the third quarter, to reach its highest level since the fourth quarter of 2016.

At 14:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -23.1489, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 11.6848. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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