Financial News: UK Service Sector Logs Another Contraction In October

UK Service Sector Logs Another Contraction In October

11/03/2023 - 07:15:00 (RTTNews)

(RTTNews) - The UK service sector shrank for the third straight month in October as the cost of living pressures, high interest rates and weak consumer sentiment curbed demand, survey data published by S&P Global and the Chartered Institute of Procurement & Supply showed Friday.

At 49.5, the services Purchasing Managers' Index rose from 49.3 in September. The flash reading was 49.2. Despite an increase, the score below 50.0 signaled contraction in the sector.

The survey showed that unfavorable domestic economic conditions and squeezed household budgets damped new business opportunities. The latest fall in new work was the fastest since November 2022.

By contrast, new work from abroad increased in October underpinned by the upturn linked to rising demand from clients in the US and Middle East.

Volumes of unfinished work declined further suggesting that service providers had sufficient capacity to complete new and existing workloads.

Employment numbers decreased slightly due to the non-replacement of leavers amid weak sales and worries about the demand outlook.

The degree of optimism among service providers was the lowest since December 2022 amid reduced disposable income and weak business investment patterns.

Input price inflation remained on a downward trend. The overall increase in business expenses was the least marked since February 2021. On the other hand, average price charged by service providers was the fastest in three months.

"A shallow downturn in UK service sector activity persisted in October as businesses struggled to make headway against a backdrop of worsening domestic economic conditions and stretched household budgets," S&P Global Market Intelligence Economics Director Tim Moore said.

The survey revealed that the pace of contraction in the overall private sector economy slowed in October. The corresponding index posted 48.7, up from an eight-month low of 48.5 in September. The flash score for October was 48.6.

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