The UK service sector contracted the most in eight months in November but the pace of decline was slower than initially estimated, survey results from IHS Markit and Chartered Institute of Procurement & Supply showed Wednesday.
The final services Purchasing Managers’ Index fell to 49.3 in November from 50.0 in October. Although the reading was above the flash reading of 48.6, the index signaled the steepest drop since March.
The survey showed that domestic political uncertainty once again led to cautious business and consumer spending. Incoming new work declined at the sharpest rate for over three years.
New orders from abroad declined at the fastest rate since the index began in September 2014 as lack of clarity over Brexit resulted in delays to business investment decisions.
There was a solid reduction in backlogs of work in November and data revealed a stabilization in staffing numbers.
Nonetheless, business optimism edged up further with the degree of confidence reaching a four-month high as respondents hopes of a more stable political and economic landscape.
On the price front, the survey showed that input price inflation slowed for the third consecutive month and the latest increase was the weakest since August 2016.
At the same time, prices charged by service sector firms rose only moderately in November, which suggested that subdued demand conditions continued to squeeze operating margins.
The final composite output index that combines performance of manufacturing and services sectors, came in at 49.3 in November, down from 50.0 in October. The index was up from the flash score of 48.5 but still the joint-lowest since July 2016.
Lower manufacturing production alongside an absence of growth in the service economy means that the IHS Markit/ CIPS composite output index is consistent with UK GDP declining at a quarterly rate of around 0.1 percent, Tim Moore, economics associate director at IHS Markit, said.