UK Services Activity Logs Marginal Upturn In December

(RTTNews) - The UK service sector activity showed only a marginal expansion at the end of the year amid the fastest fall in employment in four years due to weak demand and higher payroll costs, the S&P Global purchasing managers' survey showed on Monday.

The final services Purchasing Managers' Index increased slightly to 51.1 in December to 50.8 in November, and below the flash reading of 51.4. A score above 50 indicates expansion, while any reading below suggests contraction in the sector.

New orders were almost stagnant across the service sector and rose only fractionally as falling confidence among clients in the wake of the Autumn Budget, especially due to forthcoming increases in employers' National Insurance contributions.

The lower customer demand was linked to lackluster domestic and overseas economic conditions. New export orders fell for the first time since September 2023 amid lower demand from EU clients.

The end of the year highlighted a marked decline in employment, with the latest rate of job shedding was the quickest since early 2021. This decline was largely attributed to hiring freezes and the non-replacement of leavers due to rising payroll costs.

Looking ahead, subdued business optimism was shown by service providers in December due to constrained recruitment plans, tight budget setting among clients, and worries about the broader UK economic outlook.

On the price front, input price inflation accelerated to an 8-month high, led by higher raw material costs and salary payments. As a result, selling price inflation rose to the strongest in six months.

The composite output index edged down to 50.4 in December from 50.5 in November, indicating a further weaker upturn in the British private sector economy.