British services sector shrugs off Brexit fears to continue robust employment trend

Source: Xinhua| 2017-10-05 10:03:57|Editor: Song Lifang
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LONDON, Oct. 4 (Xinhua) -- Britain's dominant services sector continues its strong creation of new jobs, despite a slight fall in activity and continued worries over the potential harm of Brexit.

According to a survey report released Wednesday by financial information firm IHS Markit, Britain's Services Purchasing Managers' Index (PMI) hit 53.6 in September, up from an 11-month low of 53.2 in August (above 50 shows growth).

The third quarter aggregate figure of 53.5, compared to an averaged 54.3 in the previous quarter, shows that growth in the services sector, which accounts for more than 75 percent of the British gross domestic product (GDP), has eased slightly since the second quarter.

Survey respondents cited a range of supportive economic fundamentals, including healthy labor market conditions and resilient consumer spending. This is positive for the British economy as consumer spending is currently the principal driver of growth.

However, there were also reports that worries about the business outlook, founded in uncertainty over the outcome of the Brexit negotiations, had acted as a headwind to growth.

"Below the pick-up in the headline PMI, the services survey also saw a drop in the new orders component of the survey, which, at 53.3, was at its lowest in 13 months," Sam Hill, chief UK economist at Royal Bank of Canada, told Xinhua.

"This month's survey also showed input prices at a seven-month high with firms reporting higher food, energy and fuel bills as well as increased import prices, which was reflected in a rise in output prices. Despite also reporting rising staff salaries, firms continued to expand employment at a relatively robust rate," Hill said.

The rate of job creation eased only slightly from August's 19-month high, and a number of firms commented on increased unfilled vacancies at their business units, reflecting difficulties in recruiting suitably skilled staff.

Slack in the British economy has been reduced with unemployment at 4.3 percent and the number of people in jobs at a record high.

Hill said that with the PMI surveys for manufacturing, services and construction for the third quarter completed with Wednesday's services release, GDP growth looked likely to be 0.3 percent quarter on quarter.

The positive performance of the services sector contrasts with the contraction in the smaller construction sector, as revealed in PMI figures on Tuesday.

The figures are unlikely to deter the Bank of England's Monetary Policy Committee (MPC) from its intention of putting up the bank rate from its current record low of 0.25 percent.

According to the MPC minutes released last month, the body intended to rewind the 0.25 percent cut made in the wake of the Brexit vote as a precaution against economic headwinds in "the coming months."

"Overall, the MPC still looks on track to put the bank rate up at the November meeting. Beyond that though, we remain cautious about the outlook for the economy with the ongoing loss of momentum in the all-important consumer sector," said Hill.