UK services sector grows at fastest pace in 10 months in November

Britain's services sector grew at the fastest pace in 10 months in November, as input prices inflation declined for the first time since May, a survey released on Monday (5 December) by IHS Markit Economics showed.

Markit's Purchasing Managers Index (PMI) for the services sector rose from 54.5 in October to 55.2 last month, beating expectations for a 54.0 reading.

The service sector accounts for more than 75% of the UK economy.

The latest figure was the highest on the record since January and marked the fourth consecutive month the index has come in above the 50.0 threshold that indicates expansion.

Growth of total business activity was supported by a further solid increase in new work, Markit added as new business rose for the fourth successive month, and at the second-fastest rate since January.

The pace of expansion declined slightly from the previous month but remained in line with the long-run survey average.

"The sustained improvement in the business surveys and sharp rise in prices suggest that the odds will continue to shift away from the Bank of England adding more stimulus," said Chris Williamson, bhief business economist at IHS Markit.

"However, any policy tightening still seems a long way off given the uncertainty facing the UK economy."

Meanwhile, the weak pound boosted demand from abroad but, conversely, the currency sharp decline in the wake of the European Union referendum and the ongoing uncertainty surrounding the Brexit process contributed to drag business confidence down to the lowest level since July.

The weak pound also had an effect on input price inflation, which remained sharp in November even though it declined for the first time since May.

According to Markit, companies attributed inflationary pressures to the weak sterling exchange rate driving up import costs such as food, higher fuel prices, international travel and rising labour costs.

"Rising prices – often linked to the weaker pound – are a big concern, however, and suggest that inflation is set to lift higher," Williamson added.

"The past two months have seen the steepest rise in businesses' costs for over five-and-a-half years. These higher costs will inevitably feed through to consumers in the form of higher prices."