Growth at U.K. service companies expanded faster than economists forecast last month as new business improved.
Markit Economics said its Purchasing Managers’ Index rose to 58.6 from 56.2 in October, which was a 17-month low. Economists had forecast an increase to 56.5, according to the median estimate in a Bloomberg News survey. A reading above 50 indicates expansion.
The report, along with separate manufacturing and construction gauges, indicates the U.K. economy will grow 0.6 percent this quarter, Markit said. With inflation below the Bank of England’s target, economists forecast no change to policy tomorrow after Governor Mark Carney highlighted headwinds to growth such as a weakening euro area.
A measure of new business at services companies rose to 59 in November from 58.3 in October, and employment increased, Markit said. Input-price inflation eased and
output prices stagnated. Oil prices have collapsed into a bear market amid signs of slowing global demand growth and higher U.S. output.
“Faster growth of services activity brings welcome news that fears of a potentially sharp slowdown in the economy look overplayed,” said Chris Williamson, chief economist at Markit. “Fortunately, higher staff costs are being countered by falling fuel prices, giving policymakers greater scope to hold off from raising interest rates amid the ideal combination of robust economic growth and low inflation.”
Markit’s U.K. composite index rose to 57.6 in November from 55.8 in October. Its gauge of manufacturing and services in the euro area fell to 51.1 in November from 52.1 in October. That’s below an initial estimate of 51.4 published on Nov. 20.
The BOE’s Monetary Policy Committee starts its two-day monthly meeting today, and all 50 economists in a Bloomberg survey forecast the key interest rate will remain at a record-low 0.5 percent. The bank will announce the decision at noon in London tomorrow.
-With assistance from Ainhoa Goyeneche in London.
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