Services sector momentum grew in October, Nikkei says

BOE Needs Messaging With a Rate Hike Says UBS's Yu

BOE Needs Messaging With a Rate Hike Says UBS's Yu

Output in the construction sector edged into growth last month despite confidence sinking to a near five-year low.

Input cost inflation hit its highest point in four months while services providers raised the prices they charge at the fastest rate since August 2015, although the pace remained modest.

A reading above 50 indicates an expansion while one below 50 denotes a contraction in activity.

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Data from IHS Markit published on Thursday showed that output growth in the sector was largely confined to house building last month, and was capped by lower volumes of civil engineering and commercial activity.

Economists said this was consistent with fourth-quarter United Kingdom gross domestic product growth improving from the 0.4% rate in the third quarter, though the PMIs do not always match up with official figures and do not include the struggling retail sector.

The official manufacturing PMI, which covers the services industry and the construction sector, declined to 54.3 in October from September's over-three-year-high of 55.4, according to NBS announcement on Tuesday.

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Chris Williamson, chief business economist at IHS Markit, which compiles the survey, said: "The latest PMI surveys bring mixed news on the economy".

But with official manufacturing figures beginning to reflect the strength of the surveys and improvements in services output at the end of Q3 was consistent with the Capital Economics view that the economy "has held onto its recent momentum in Q4 and should post reasonable growth of 2% or so next year. We envisage a second hike in the second quarter of 2018".

"Housing continued to show the strongest foundations and is set to be the main driver of growth in the coming months but the prospect of softer consumer demand and rising costs will impact", said Duncan Brock, director of customer relationships at the Chartered Institute of Procurement and Supply.

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"The good news was that October saw business activity across services, manufacturing and construction grow at its fastest rate for six months".

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