News Release

Purchasing Managers Index

MARKET SENSITIVE INFORMATION
EMBARGOED UNTIL: 09:30 (UK), 5 November 2014

Markit/CIPS UK Services PMI

Activity growth down to 17-month low

Data collected 13-29 October

Activity growth continues to weaken

Key Points:

Both activity and new business rise at slower

rates in October

Business sentiment also weakens

Employment rises at strongest pace for three

months

Summary:
UK service sector growth was sustained during
October, but at the slowest rate in 17 months amid
reports of some market uncertainty creeping into
client decision-making. Although new work also
continued to rise sharply, it did so at the slowest
rate for five months. Business confidence
weakened slightly as a result to a level below its
historical average, while average charges were
reduced fractionally for the first time in 17 months.

Slower increase in new business recorded

Nonetheless, companies recruited additional staff to

the greatest degree in three months as capacity
remained under some pressure, which was
highlighted by a further increase in work
outstanding.
The seasonally adjusted Business Activity Index
posted 56.2 in October, down from 58.7 in
September. Latest data marked the second
successive monthly fall in the headline index, and
Octobers reading was the lowest recorded for 17
months, although the implied rate of growth
remained above the average for over 18 years of
data collection.
New business growth was again the principal prop
to higher activity. Octobers data indicated the
twenty-second successive monthly increase in
incoming new work, and respondents commented
on success in securing new work via higher
marketing and improved client engagement.

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However, a number of companies commented that

new business (and activity) were currently at
elevated levels and October had proven to be a
slower month in terms of demand growth compared
to earlier in the year. There were also several
reports of uncertainty creeping into client decision
making. The net result was a slowdown in the rate
of new business growth to a five-month low.

increasing. Wage cost pressures were reportedly

the principal driver of another round of input price
inflation in October.

The weaker rise in new work had some impact on

business confidence, with some companies
choosing to re-evaluate their forecasts for the
coming 12 months. Although business expectations
remained in positive territory, with firms planning
new product launches and higher investment,
overall confidence was the lowest in two months
and below the surveys historical average.

Employment rises at firmer pace

Finally, strong competition and efforts to entice

clients led to a fractional fall in output charges, the
first such reduction for 17 months.

Despite tentative signs of slower growth,

companies remained suitably encouraged to take
on additional staff not only to deal with current
workloads (backlogs of work rose again in October)
but also to support future company expansion.
Latest data showed the sharpest rise in
employment for three months.
Anecdotal evidence implied that recruitment was
taking place against the backdrop of a tighter labour
market, with salaries and demands for pay
Comment:
Chris Williamson, Chief Economist at Markit,
which compiles the survey:
Slower service sector growth knocks the prospect
of interest rate hikes firmly on the head, adding to
an increasingly downbeat flow of economic data in
recent weeks which has thrown a cloud of
uncertainty over the outlook.
A sharp easing of service sector growth to the
weakest since May of last year comes on the heels
of data showing construction growth sliding to a
five-month low and the goods-producing sector
shifting down a gear since earlier in the year.
After GDP growth slowed to 0.7% in the third
quarter, a 0.5% expansion is currently being
signalled by the surveys for the fourth quarter.
However, with inflows of work rising across all three
sectors at the slowest rate for 16 months, there is a
risk that economic growth could weaken further.
The surveys also point to lower inflation in coming
months: average prices charged for goods and
services fell, albeit only slightly, for the first time
since July 2012.
The surveys therefore suggest that the Bank of
England will wait to gauge the full extent of the
slowdown before making any decisions on policy.

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David Noble, Group Chief Executive Officer at

the Chartered Institute of Purchasing & Supply:
This month appears to be a slowdown month as
the services sector comes off the boil, challenged
by capacity constraints, increased backlogs and a
slight reduction in new business growth.
Procurement professionals reports tiptoeing
through a time of uncertainty, as suppliers
demonstrate stronger bargaining power in tighter
market conditions.
After the scramble to regain former heights seen in
the last year comes a period of reflection and rebalance while positive sentiment remains high and
levels of staffing are increased. Coupled with the
rise in employment levels comes increased input
prices with higher wage demands and more
competition.
Finally, with a possible interest rate rise looming,
and an associated dampening in confidence, the
sector simmers at a more even temperature.

Markit Economics Limited 2014

rd

The November Report on Services will be published on Wednesday 3 December 2014 at 09:30
-Ends-

Contact Information:
For economics comments, data and technical queries, please call:
Joanna Vickers
Tel: +44 207 260 2234
Email: joanna.vickers@markit.com
For industry comments, please call:
CIPS
Trudy Salandiak
Tel: +44 1780 761576
Email: trudy.salandiak@cips.org

Hill & Knowlton Strategies

Emily Franca
Tel: +44 (0)20 7973 5987
Email: emily.franca@hkstrategies.com
Notes to Editors:
Where appropriate, please refer to the survey as the Markit/CIPS UK Services PMI.
The Markit/CIPS UK Services PMI covers transport & communication, financial intermediation, business services, personal services,
computing & IT and hotels & restaurants.
Each response received is weighted each month according to the size of the company to which the questionnaire refers and the contribution
to total service sector output accounted for by the sub-sector to which that company belongs. This therefore ensures that replies from larger
companies have a greater impact on the final index numbers than replies from small companies.
The results are presented by question asked, showing the percentage of respondents reporting an improvement, deterioration or no change
on the previous month. From these percentages an index is derived such that a level of 50.0 signals no change on the previous month.
Above 50.0 signals an increase (or improvement), below 50.0 a decrease (or deterioration). The greater the divergence from 50.0, the
greater the rate of change signalled.
The indexes are calculated by assigning weights to the percentages: the percentage of respondents reporting an "improvement/increase"
are given a weight of 1.0, the percentage reporting "no change" are given a weight of 0.5 and the percentage reporting a
"deterioration/decrease" are given a weight of 0.0. Thus, if 100% of the survey panel report an "increase", the index would read 100. If 100%
reported "no change" the index would read 50 (100 x 0.5), and so on.
Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as
appropriate which will affect the seasonally adjusted data series. Historical data relating to the underlying (unadjusted) numbers, first
published seasonally adjusted series and subsequently revised data are available to subscribers from Markit. Please contact
economics@markit.com.

About Markit
Markit is a leading global diversified provider of financial information services. We provide products that enhance transparency, reduce risk
and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund
administrators and insurance companies. Founded in 2003, we employ over 3,000 people in 10 countries. Markit shares are listed on
NASDAQ under the symbol MRKT. For more information, please see www.markit.com

About PMI
Purchasing Managers Index (PMI) surveys are now available for 32 countries and also for key regions including the Eurozone. They are
the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their

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ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to
www.markit.com/economics.

About CIPS
The Chartered Institute of Procurement & Supply (CIPS) is the worlds largest procurement and supply professional organisation. It is the
worldwide centre of excellence on purchasing and supply management issues. CIPS has a global community of 100,000 in 150 countries,
including senior business people, high-ranking civil servants and leading academics. The activities of procurement and supply chain
professionals have a major impact on the profitability and efficiency of all types of organisation and CIPS offers corporate solutions
packages to improve business profitability. www.cips.org
The intellectual property rights to the UK Services PMI provided herein are owned by or licensed to Markit Economics Limited. Any unauthorised
use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markits prior
consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (data) contained herein, any errors,
inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special,
incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index and PMI are either registered trade marks of
Markit Economics Limited or licensed to Markit Economics Limited. CIPS use the above marks under license. Markit is a registered trade mark of
Markit Group Limited.

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