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Housing fuels service sector recovery

With interest rates at a record low and buyers benefitting from the current stamp duty holiday, the property market is going from strength to strength, with both transactions and prices increasing, and it is this improvement that is helping to drive the service sector recovery, according to new figures.

Estate agents and related businesses enjoyed strong growth last month, the latest analysis from the IHS Markit/CIPS’s services purchasing managers’ index (PMI) shows.

The index stood at 56.1 last month, up from just 13.4 at the peak of coronavirus restrictions and lockdown in April. Anything above 50 is considered a sector in growth.

However, September’s reading is down from 58.8 in August, primarily due to the end of the Eat Out To Help scheme.

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Chris Williamson, chief business economist at IHS Markit, which compiles the survey, commented: “The UK service sector showed encouraging resilience in September, with business activity continuing to grow solidly despite the government’s Eat Out To Help Out scheme being withdrawn.

“Unsurprisingly, spending in the restaurant sector slumped after spiking higher in August, and many other consumer services activities showed a similar slide back into contraction as renewed lockdown measures were introduced, causing the overall rate of expansion to moderate.”

Despite recent growth, there are signs that optimism in the service sector is starting to cool amid concerns that there could be a second Covid-19 wave, while Brexit uncertainty is also having an adverse impact.

Growth in the service sector has been hindered by tighter restrictions introduced during the past few weeks, while the lack of international tourists is hurting businesses, and this in turn means potential job cuts.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Once again job losses remained the black spot amidst these pockets of recovery.

“With the seventh consecutive monthly drop in job numbers, redundancies have replaced job hiring in an attempt to shield firms from rising input costs, but these strategies will devastate local communities.”

Source: Property Industry Eye

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Recovering factories keep UK economy on track in February – PMIs

British businesses kept up a solid rate of growth in February as factories posted the fastest rise in output for 10 months, despite ripples from China’s coronavirus outbreak affecting supply chains, a business survey showed on Friday.

The ‘flash’ early readings of the IHS Markit/CIPS UK Purchasing Managers’ Index (PMI) showed the expansion of Britain’s vast services sector slowed slightly this month, but this was cancelled out by an unexpected upturn in manufacturing.

Britain’s performance bettered the euro zone’s for the second month running, as the PMI suggested the world’s fifth-largest economy looked on track to grow around 0.2% in quarterly terms after it slowed to a crawl late last year.

The composite PMI, which combines manufacturing and services indexes, held steady at 53.3 in February, jointly the highest reading since September 2018 and beating the consensus forecast of 52.8 in a Reuters poll of economists.

The survey chimed with other gauges which show the economy has picked up since Prime Minister Boris Johnson’s election victory in December, even though the level of the PMI remains below its long-run average.

“The recent return to growth signalled by the manufacturing and services PMIs provides a clear indication that the UK economy is no longer flat on its back,” said Tim Moore, associate director at IHS Markit, which compiles the survey.

The manufacturing PMI rose to 51.9 in February from 50.0, its highest level since April and above all forecasts in a Reuters poll, although there were signs that the coronavirus outbreak might have an impact on production in Britain.

“Manufacturers noted that abrupt shortages of components from China had reverberated through their supply chains and led to difficulties sourcing critical inputs,” Moore said.

He cited a record deterioration in the PMI’s gauge of suppliers’ delivery times, meaning manufacturers were forced to wait much longer this month for the arrival of parts.

Delivery times increased more sharply than the previous record in September 2000, when British truck drivers blockaded petrol stations in protest at high fuel taxes.

The services PMI, which covers the bulk of British economic output, fell in February to 53.3 from 53.9, close to the Reuters poll forecast for a reading of 53.4.

“The latest survey … revealed a solid upturn in the service economy, driven by improving domestic spending and a recovery in new business enquiries since the start of 2020,” Moore said.

Reporting by Andy Bruce; Editing by Hugh Lawson

Source: UK Reuters

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UK economy sent ‘staggering’ as services sector shrinks ahead of election

The UK services sector contracted last month at the fastest pace since March, survey data has shown, as domestic political uncertainty drove Brits to be cautious with their spending.

The IHS Markit/Cips services purchasing managers’ index (PMI) fell to 49.3 in November, down from a score of 50 in October. Although the reading was above the initial estimate of 48.6, a sub-50 figure puts the UK’s most important sector in contraction territory.

Today’s services sector reading is the latest sign this week that the UK economy has slowed in the final three months of the year. The manufacturing and construction sectors both also contracted in November, data showed.

Tim Moore, economics associate director at data firm IHS Markit, said: “November’s PMI surveys collectively suggest that the UK economy is staggering through the final quarter of 2019.”

The Brexit crisis and a global economic slowdown have held back the UK economy in 2019. Survey respondents said in November that the impending General Election has brought fresh uncertainty.

IHS Markit said that private sector output fell in November after stagnating in October, with the all-sector PMI hitting its joint-lowest reading since July 2016.

Subdued demand was a particular problem for the services sector in November, IHS Markit said, causing the sharpest fall in new work in over three years.

Despite lower workloads, staffing numbers stabilised last month. This compares with the manufacturing and construction sectors, which laid off workers in November.

Duncan Brock, group director at Cips – the Chartered Institute of Procurement & Supply – said Brexit nerves also “descended over European clients in particular who were reluctant to commit until there is more clarity in the UK’s future direction”.

Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said he was “skeptical” that “services output really is declining”.

“For a start, the services PMI does not cover the retail and public sectors, which have retained their momentum this year.” He added that the PMI seems to be “excessively downbeat during periods of political uncertainty”.

Ruth Gregory, senior UK economist at Capital Economics, was more pessimistic. She said the November readings indicated that “GDP growth has slowed sharply in the fourth quarter and perhaps even turned negative”.

By Harry Robertson

Source: City AM

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Brexit woes hits UK services sector

UK services sector output increased marginally in February, Brexit concerns have continued to weigh on the economy and hiring of staff has declined to its fastest pace in seven years.

HIS Markit/CIPS purchase managers index (PMI) showed a reading of 51.3 in February, a reading above 50 indicates growth.

Economist’s expectations were forecast to be 49.8, however recent data suggests the economy is almost stagnant, and on track for its weakest quarter since the last three months of 2012.

Financial services firms have held off hiring staff due to the outlook of the economy, and employment numbers declined at a faster rate since 2012.

Chris Williamson, chief business economist at IHS Markit, which compiled the survey said, “The latest PMI surveys indicate that the UK economy remained close to stagnation in February, despite a flurry of activity in many sectors ahead of the UK’s scheduled departure from the EU.

“The data suggest the economy is on course to grow by just 0.1% in the first quarter.

“Worse may be to come when pre-Brexit preparatory activities move into reverse. Many Brexit-related headwinds and uncertainties also look set to linger in coming months even in the case of PM May’s deal going through.

“Business optimism about the year ahead has consequently sunk to the lowest ever recorded by the survey with the exceptions of the height of the global financial crisis and July 2016.”

Howard Archer, chief economic adviser at Item Club said, “There is a genuine chance now that the Bank of England will sit tight on interest rates through 2019, especially if Brexit is delayed and extends the uncertainty.”

Source: London Loves Business