Services slowdown fails to dampen UK optimism

The UK Markit services PMI fell from 60.4 in November to 58.8 in December. UK services PMI had been expected to rise to 60.5.

UK services showed a similar performance to manufacturing in December. While the pace of growth has declined, there was still a strong increase in activity and employment. The major factor contributing to the activity growth during December was a rise in incoming new business.

Optimism is now at a three-year high with growth in new orders "reassuringly robust," according to Markit Economics. "More strong growth looks likely as we move into 2014," said Markit's chief economist, Chris Williamson.

Samuel Tombs, UK economist at Capital Economics commented:

While the headline activity balance fell from 60.0 to 58.8 – the weakest reading seen in the second half of 2013 – this was still consistent with a very strong rate of growth. Indeed, the average level of the index over the fourth quarter as a whole points to services output rising by about 1.5% q/q. Confidence amongst services firms also rose in December to its highest level since March 2010. As a result, a weighted average of all three CIPS surveys points to quarterly GDP growth in Q4 of about 1.5% too.

New work rose throughout 2013 with the average growth rate in the final quarter of the year the best in the history of the survey.