In the month of December, the UK service sector saw a solid pace of stablisation, with activity rising to a strong overall rate, according to the latest PMI survey data from Markit and CIPS.
The strong rise of activity was supported by a sharp increase in new business, with outstanding business continuing to grow only modestly in December. Also long-term expectations from firms for business activity were the weakest since early 2013.
It also shows the latest Markit/CIPS service sector purchasing managers’ index (PMI) in November, where it fell to 55.5 from 59.9, which is still above average. A figure above 50 is seen as growth in the sector.
In both Q3 and Q4, the headline figure averaged 55.4, representing a weaker growth outcome in the second half of 2015 than in 2013 (56.9) and 2014 (58.2). The index average in 2015 as a whole averaged at 56.7.
Chief Economist at Markit, Chris Williamson, commented: “The services sector remained the key driver of the UK’s economic upturn in December, helping to offset the recent weakness seen in manufacturing and putting the economy on the starting block for another year of 2-2.5% growth in 2016.”
He continues to say that the survey shows that the economy has seen a 0.5% growth in Q4 2015, meaning GDP would have risen 2.2% in 2015.
However, going forward, the outlook isn’t guaranteed to be bright, as Mr. Williamson adds: “With business expectations about future workloads dropping to the lowest for almost three years, firms are becoming more cautious in the face of growing uncertainties.
“The cost of the impact of the Living Wage, government spending cuts, a potential hike in interest rates, global economic growth jitters and of course ‘Brexit’ are all weighing on business minds and pose significant downside risks to economic growth in 2016.”
David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, concluded: “Through new lines of business, ongoing – if slightly muted – optimism for the future, new marketing activity and a three-year continually sturdy rise in output from the sector, stability and modesty are the watchwords for this mouth.”
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