UK Services PMI down to 54.5

The UK service sector continued to expand at the start of 2017, according to the latest PMI® survey from IHS Markit and CIPS. That said, the pace of growth in total business activity moderated for the first time in four months. New business and employment also increased at slower rates, and outstanding work fell slightly. Inflationary pressures remained intense, with input price inflation accelerating to the highest since March 2011 and charges rising at a rate unchanged from December’s 68-month record.

UK Construction PMI fell more than expected

January data revealed a slowdown in construction sector growth, with business activity and incoming new work both expanding at weaker rates than at the end of 2016. Despite this, survey respondents signalled that confidence regarding the year-ahead outlook picked up to its strongest since December 2015, largely reflecting new project starts and a resilient economic backdrop. This contributed to the fastest rise in employment numbers since May 2016. Meanwhile, exchange rate depreciation against the euro and the US dollar resulted in the strongest rate of input cost inflation since August 2008.

UK Manufacturing PMI posted 55.9 in January

The UK manufacturing sector made a strong start to 2017. Output rose at the fastest rate since May 2014, as new order intakes expanded at a robust pace. Price pressures intensified, however, as input cost inflation surged to a survey record high and output charges also increased at one of the steepest rates in the series history.

The seasonally adjusted Markit/CIPS Purchasing Managers’ Index posted 55.9 in January, only a couple of ticks below December’s two-anda-half year high of 56.1. The headline PMI has remained above the neutral mark of 50.0 for six straight months.

UK GDP grew by 0.6%

UK gross domestic product (GDP) was estimated to have increased by 0.6% during Quarter 4 (Oct to Dec) 2016, the same rate of growth as in the previous 2 quarters. Growth during Quarter 4 was dominated by services, with a strong contribution from consumer-focused industries such as retail sales and travel agency services.