The most recent IHS Markit / CIPS UK Services PMI shows that these past eight months have seen the “fastest expansion of business activity”, continuing the sector’s recovery since heavy snowfall related disruption last year in March 2017.
The report’s findings exposed:
Robust and accelerated upturn in business activity
New work increases at fastest pace for 13 months
Input cost inflation intensifies in June.
The data revealed a big rise of new work received by service providers. This rate of new business growth was the quickest for just over one year, which survey respondents credited to successful product launches, new marketing initiatives and improving economic conditions.
However, Brexit related uncertainty had impacted upon business investment, mostly in relation to spending by large corporate clients.
Survey respondents commented on an overall upturn in client demand, particularly for
business and financial services. There were also reports that unusually favourable weather conditions had boosted consumer spending.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said:
“Exceeding expectations the sector ended on a positive note at the end of the second quarter, buoyed up by the fastest rise in new orders in over a year and the strongest overall performance since last October.
“However the downside of this achievement came in the form of relentless capacity difficulties as business backlogs rose to an acute degree, not seen for around three years.
“Not even the minor uplift in hiring could alleviate the problem as salary
pressures and the struggle to find skilled hires caused firms to hesitate to increase staff numbers further.
Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:
“Stronger growth of service sector activity adds to signs that the economy rebounded in the second quarter and opens the door for an August rate hike, especially when viewed alongside the news that inflationary pressures spiked higher.
“The survey data indicate that the economy likely grew by 0.4% in the second quarter, up from 0.2% in the opening quarter of 2018. The sharp rise in business costs, linked to surging oil prices and the need to offer higher wages, suggests inflation will also pick up again from its current rate of 2.4%.”