U.K. Services Expansion Slows From Fastest Pace in 16 YearsJennifer Ryan
U.K. services growth slowed in November from a 16-year high as capacity pressures developed at service businesses from banks to airlines.
A gauge of activity fell to 60 from 62.5 in October, which was the highest since May 1997, Markit Economics said in a report today in London. The median forecast of 30 economists in a Bloomberg News survey was for a decline to 62. The gauge has been above the 50 level that divides expansion from contraction for 10 months.
Construction and manufacturing growth exceeded economists’ estimates in November, and Markit said its three indexes indicate economic growth will accelerate to 1 percent this quarter from 0.8 percent in the previous three months. Bank of England officials start their monthly two-day policy meeting today having pledged to keep the benchmark interest rate on hold until the economy is growing at a sustainable pace.
The data suggest “an impressively strong pace of expansion and one of the best performances for the sector we’ve seen since data were first collected in 1996,” said Chris Williamson, chief economist at Markit. “There’s also scope for growth to pick up again in December.”
The pound stayed lower against the dollar after the report was published and traded at $1.6360 as of 10:04 a.m. London time, down 0.2 percent from yesterday.
Reports this week showed Markit’s factory activity index increased to 58.4 in November, the highest since February 2011, from 56.5 in October. Its construction gauge rose to 62.6 from 59.4.
In services, input-cost inflation hit a nine-month high, Markit said, while output charges rose to the most marked degree since May 2011.
“Combined with strengthened demand and a surge in new orders, backlogs of work rose steadily,” David Noble, chief executive officer at the Chartered Institute of Purchasing and Supply, said in the statement. “In anticipation of growing investment and expansion in 2014, firms sought to boost their staffing levels though weren’t able to do so as quickly as they might have liked.”
Chancellor of the Exchequer George Osborne publishes his Autumn Statement tomorrow, when he may scale back his borrowing needs to reflect the benefits to the public finances from the strengthening recovery.
The BOE’s Monetary Policy Committee has pledged to leave its key rate at 0.5 percent until unemployment, now at 7.6 percent, falls to 7 percent. Governor Mark Carney said last month that “given that the recovery is relatively new, what the MPC is not going to do is to pull the rug out from under the recovery just as it gets going.”
All 48 economists in a Bloomberg survey expect no change to the rate this week, and all 39 economists in a separate poll say the bond-purchase plan will stay at 375 billion pounds ($614 billion). The BOE will announce the decisions at noon in London tomorrow.