UK service sector soars to highest growth for three months – EU sector strongest for six years
The UK service sector has seen impressive growth in March 2017, boosting British business confidence, but failing to strengthen Sterling.
The latest Markit/CIPS UK Services Purchasing Managers’ Index (PMI) showed a strong figure of 55.0 for March 2017, a three-month high and a noticeable improvement on February’s 53.3.
Positive results for the UK Service Sector – but the pressure is on…
Growth in the sector has come from increased demand, both domestically and from overseas, as UK economic conditions and a weak Pound provide opportunities for new business from the US and Europe. Respondents noted the biggest growth increase for three months and new business growth has increased at a faster rate than the survey averages.
However, jobs growth was muted, at the weakest rate for nearly a year-and-a-half; and pricing pressures continue to take their toll, with prices growing to their highest for eight and a half years following a steep hike in input costs.
Sterling weakness and increasing food, energy and fuel prices were cited as the key reasons for burgeoning costs, in addition to salary pressures and increased workloads, leading to backlogs in some areas.
David Johnson, director at currency specialists, Halo Financial, said:
“Continued strong growth in the UK service sector has contributed to growing business confidence in that sector. That’s vitally important because service industries make up nearly three quarters of UK GDP. However, as with other sectors, costs are increasing, so the services sector is not alone in seeing margins squeezed.
“Sadly, strong performance data is doing little to affect the Pound’s strength against its key currency pairings. The ongoing Brexit debate and political and economic activity in the US and Europe, in particular, continue to shape currency market sentiment. Markets are watching closely for any positive signs for the Pound to pick up its pace and that may be driven by problems elsewhere.”
EU service sector soars to near-six-year high
Meanwhile, in Europe, the service sector has seen growth soar almost a six-year high of 56.0 in March, an increase from the February figure of 55.5, but lower than below the 56.5 that was forecast.
Eurozone countries all saw increased business, at the strongest growth of new work in nearly six years.
The biggest improvement was recorded in Ireland, despite the pace of growth being at a three-month low.
France experienced a nearly six-year high rate of growth, with Germany seeing the highest growth in 15 months.
Optimism for the sector remains high, with confidence at six-year highs and a positive outlook for Eurozone economic improvement and increasing demand over the coming year. Yet cost pressures continue, showing the biggest hike in average service charges for nearly six years and increases in selling prices across the board. Input price inflation is still hovering around the previous five-and-a-half-year record figures seen in February 2017.
“Growth in the sector continues, as Europe maintains a positive outlook on economic and business growth. However, price pressures are still the elephant in the room and are likely to have an increasing effect on performance and output – and political concerns relating to French and German elections are still at the back of everyone’s minds.”