The strongest inflation pressures in at least 23 years crimped the recovery of British services companies from the COVID-19 pandemic in November and dented optimism for the coming year, a survey showed on Friday.
The IHS Markit/CIPS UK Services Purchasing Managers’ Index (PMI) fell to 58.5 in November from 59.1 in October, revised down slightly from a preliminary “flash” reading of 58.6.
The survey’s gauges of costs paid by services companies and prices they charged to customers hit their highest levels since records started in 1998, which some Bank of England officials may view as backing the case for an interest rate hike on December 16 at its next policy announcement.
New orders rose at the fastest pace in five months, driven by the travel industry after the easing of lockdown restrictions, the PMI showed.
“Worryingly, the fastest-growing parts of the service sector are also the most exposed to the return of tighter pandemic restrictions, especially as we approach the crucial festive spending period,” said Tim Moore, economics director at IHSMarkit.
Optimism fell to a one-year low, even before news of the Omicron variant of COVID-19 became known to most of the companies surveyed last month.
The composite PMI – a combination of the services survey and Wednesday’s manufacturing PMI – eased to 57.6 in November from 57.8 in October.