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UK services PMI rises to 10-mth high in November
[LONDON] Businesses in Britain's services sector grew at their fastest pace since January last month, a survey showed on Monday, and the broader economy kept up its momentum in late 2016, even if firms have some worries about the year ahead.
The Markit/Cips services purchasing managers' index (PMI) - a closely watched gauge of the services sector - rose to 55.2 in November from 54.5 in October, beating all the forecasts in a Reuters poll of economists.
Despite a dip in the equivalent survey of manufacturers published last week, overall the November PMIs suggest the economy as a whole will maintain the third quarter's solid 0.5 per cent growth rate through to the end of the year, Markit said.
"The pace of UK economic growth remains resiliently robust in the fourth quarter, despite ongoing uncertainty caused by Brexit," said Chris Williamson, chief business economist at IHS Markit, the company that compiles the survey.
Most economists and the Bank of England said Britain's economy would slow sharply after June's vote to leave the EU. But strong consumer demand and a boost to exporters from the heavy post-referendum fall in sterling have kept growth going.
A separate survey by manufacturing lobby EEF released earlier on Monday showed a boost in new orders and a better-than-expected recovery in output.
Last month the Bank of England revised up its forecasts to pencil in 0.4 per cent growth for the last three months of 2016. But it also said annual growth would slow to 1.4 per cent next year from 2.2 per cent in 2016 as higher inflation squeezes household incomes.
Businesses are already starting to feel the pinch of costlier imports due to the fall in sterling, and Markit said business costs had risen by the most in five-and-a-half years during the past two months.
"These higher costs will inevitably feed through to consumers in the form of higher prices," Mr Williamson said.
The BoE forecasts inflation will surge to 2.7 per cent next year from 0.9 per cent in the most recent data, and many private-sector economists think it could rise even faster.
However, very few expect the BoE to reverse August's rate cut in response. On Friday the central bank's chief economist, Andy Haldane, warned against hasty action. BoE Governor Mark Carney will speak on the economy later on Monday.
Services businesses taking part in the PMI reported a positive outlook overall as the weak pound boosted foreign orders. They also expected domestic demand to remain resilient.
However, optimism fell to the lowest since just after June's referendum and the second-lowest in four years.
"Anecdotal evidence highlighted ongoing uncertainty among service providers linked to Brexit, the value of sterling and the unexpected result of the U.S. presidential election," Markit said.