Data released by S&P Global/CIPS showed that activity in the UK private sector rose sharply in November, exceeding economists' forecasts, and reaching a 6-month high. Productivity in the service sector also improved significantly, reaching its highest level since June.
The UK composite PMI rose to 52.1 points from 50.7 points in November. Economists had expected growth to 51.7 points. Meanwhile, the services PMI increased to 53.4 points from 50.9 points in November. Consensus estimates suggested an increase to 52.7 points. Both indices are above the 50-point mark, which indicates an expansion of activity in the sector, for the second month in a row.
The report showed that higher business activity in the service sector was again linked to a tentative turnaround in client demand, especially among firms in technology and financial services. New orders rose again in December, with the growth rate reaching a 6-month high. Survey respondents commented on a boost to sales from rising business optimism, despite lingering concerns about weak UK economic growth prospects. However, new export orders increased only slightly compared to November. Meanwhile, employment declined for the third time in the last four months, as margin pressures and mutated demand for much of the second half of 2023 had led to hiring freezes, the non-replacement of voluntary leavers and some redundancies. The data also pointed to a modest reduction in volumes of outstanding business. However, service providers are upbeat about their output growth prospects. Around 51% of respondents anticipate an increase in business activity during the year ahead, while only 12% forecast a decline. The overall degree of business optimism was the highest since last May. Meanwhile, the latest survey indicated another month of strong cost pressures across the service economy: the rate of input price inflation accelerated to the highest since September, while the overall rate of output price inflation accelerated to its fastest for five months.