EURJPY Euro vs Japanese Yen

The UK service sector rebounded at a faster-than-estimated pace in January driven by rising client demand after general election, survey results from IHS Markit and Chartered Institute of Procurement & Supply showed Wednesday.

The services Purchasing Managers' Index rose to 53.9 in January from 50.0 in December. The reading exceeded the flash estimate of 52.9. A score above 50 indicates expansion.

The sector expanded for the first time since last August and also at the fastest rate in 16 months as the headwind from delayed decision-making had lifted since the general election and helped to deliver a return to business activity growth in January.

New business intake was the strongest since June 2018. Export sales also returned to growth in January.

A number of respondents commented on the need to hire additional staff due to an expected rise in workloads. Job creation reached its highest level since July 2019.

Operating expenses grew in January reflecting robust demand for staff and increased fuel and transportation costs. The rate of input price inflation was the strongest for four months.

Consequently, average prices charged by service providers increased the most since June 2018.

Firms reported an upturn in their projections for activity growth during the next 12 months. Latest data signaled that the degree of positive sentiment reached its highest level since May 2015. Further, the composite output index, which reflects the manufacturing and services activities, climbed to 53.3 in January from 49.3 in December. The score was above the neutral 50.0 mark for the first time since last August and above the flash estimate of 52.4.

The solid increase in private sector output was driven by a return to growth in the service economy and supported by a broad stabilization in manufacturing production.

January's PMI surveys give a clear signal that the UK economy has picked up since the general election, as a diminishing headwind from political uncertainty translated into rising business and consumer spending, Tim Moore, economics associate director at IHS Markit, said.

"With the vast majority of PMI survey data collected prior to 23rd January, we've yet to see any overall impact on business conditions from the Wuhan coronavirus outbreak, but disruptions to global supply chains and international travel could present risks to the UK economy and key trading partners in the coming months," Moore added.

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