UK Service Sector Growth Slows On Coronavirus Outbreak

The UK service sector expanded at a slower pace in February largely due to negative impact on sales from the coronavirus outbreak, final survey data from IHS Markit showed Wednesday.

The IHS Markit/Chartered Institute of Procurement & Supply services Purchasing Managers’ Index dropped to 53.2 in February from 53.9 in January. The flash score was 53.3.

This was the second-highest score since September 2018 and above the neutral 50 for the second straight month.

The composite output index posted 53.0 in February, down slightly from a 16-month high of 53.3 in January. This was below the flash estimate of 53.3.

IHS Markit Chief Business Economist Chris Williamson, said the post-election rebound in service sector growth lost some of its bounce in February, in part due to coronavirus related disruptions to sectors such as travel and tourism.

The survey data are consistent with quarterly GDP growth of just over 0.2 percent, up from stagnation in the fourth quarter of 2019, Williamson noted.

As the sector started this period of recovery in 2020, it is an unexpected turn of events that threatens to knock this progress back again, Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said.

In the service sector, business activity, new orders and employment all rose at slower rates than in January.

Growth in new business slowed in February due to the cancellations of bookings and delays to new projects among clients in Asia after the outbreak of coronavirus.

The increase in payroll numbers was only marginal as service providers noted that greater uncertainty about the global economic outlook.

Despite concerns about disruptions in China related to the coronavirus outbreak, survey data indicated that business optimism across the service economy reached its highest level since March 2015.

The survey also revealed another sharp rise in average cost burdens across the service economy.

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