UK service sector growth slows in February - IHS Markit/CIPS

According to the report from IHS Markit/CIPS, UK service providers recorded another increase in business activity and incoming new work during February, which added to signs of a rebound in customer demand since the general election at the end of last year. Survey respondents often commented on greater willingness to spend and the release of new projects that had been delayed in the run up to Brexit. However, the latest survey indicated that business activity, new orders and employment all rose at slower rates than in January. There were a number of reports citing a negative impact on sales from the coronavirus outbreak, particularly to clients in overseas markets. The loss of momentum for incoming new business also contributed to the sharpest drop in backlogs of work since last September.

Adjusted for seasonal influences, the headline UK Services PMI Business Activity Index registered 53.2 in February, to remain above the crucial 50.0 no-change value for the second month running. The latest reading was down from 53.9 in January, but still the second highest since September 2018. Companies reporting an upturn in business activity widely commented on a boost from receding political uncertainty and strong domestic economic conditions.

Total volumes of new work increased for the third month running in February, but the rate of expansion eased since the start of 2020. The main headwind to growth cited by service providers was the impact of the coronavirus outbreak, through cancellations of bookings and delays to new projects among clients in Asia. Reflecting this, latest data pointed to a renewed fall in total new orders from abroad, although the rate of decline was less marked than seen in the final quarter of 2019.

Adjusted for seasonal influences, the IHS Markit/CIPS UK Composite Output Index posted 53.0 in February, down only slightly from a 16 month high of 53.3 in January. The latest reading signalled a further solid expansion of private sector output and was only fractionally weaker than the earlier 'flash' estimate (53.3 in February).