UK services output growth continued in October, supported by another strong rise in new business, but growth slowed for the second consecutive month. Moreover, at 52.0 in October, down from 52.4 in September, the seasonally adjusted S&P Global Services PMI ® indicated the slowest increase in production levels since November 2023.
Respondents noted that improved domestic economic conditions helped boost overall business activity in October. However, there have been reports of growing trade uncertainty ahead of the fall budget as a factor delaying spending decisions among clients. Some companies also noted that geopolitical tensions have affected the appetite to spend. Longer sales conversion cycles contributed to weakening the overall new business growth rate across the services economy in October.
The recent increase in total new business was the slowest since June, but still slightly stronger than the average in the first half of 2024. Improved order books were associated with flexible business and consumer spending, despite compressed budgets and fragile confidence.
Export sales bucked the overall slowdown in new business growth. October data pointed to a strong rise in new business from abroad and the rate of expansion accelerated to its fastest rate since March 2023. Service providers have often noticed stronger demand from EU customers, despite ongoing trade frictions due to Brexit.
Employment remained a relative weakness in October. Recent survey data indicated an overall decline in employee numbers for the first time since December 2023. The modest decline in workforce levels reflects the failure to replace departures voluntarily amid budget constraints, efforts to boost productivity, and the difficulty of finding suitable candidates to fill vacancies. Meanwhile, higher salary payments continued to push input costs up in October.
Markets calm as US elections approach
Markets are nervously calm as the United States heads to the polls. He warns that the presidential election is approaching that the results may not be known as soon as people hope. Indeed, many fear that the vote will simply be the beginning of the next phase of the competition, with early victories and vote disputes.
The dollar is mostly in narrow ranges today, but Australia and Scandinavia are the strongest, and the RBA has kept interest rates steady and signaled inflation may not sustainably return to the target until 2026. Currencies in emerging markets are mostly stable, but there are two pairs from Asia-Pacific and Central Europe that are looser, as is the case with the Mexican peso.
Stocks are strong. All the large markets in Asia Pacific have advanced, but South Korea and Australia have advanced. Hong Kong and China led the rise with gains of more than 2%. The pan-European STOXX 600 index rose slightly. He was unable to hold on to yesterday’s early gains and lost 0.33%. US index futures also have a stronger bias. Standard 10-year returns are fixed. European yields are 3-5 basis points higher. While the yield on the 10-year British Treasuries peaked last Thursday near 4.53%, it remains steady and pays against 4.50%.
US 10-year yields rose by about two basis points to 4.30%. Gold fell to a six-day low near $2,725 but recovered slightly higher on the day near $2,739. Yesterday’s high was slightly above $2748. OPEC+’s decision to postpone the production increase again and Iranian threats to strike Israel (early today) helped WTI crude in December fully recover after falling at the beginning of last week.
Factors affecting the services PMI
The services PMI is influenced by various factors that reflect the overall health and performance of the services PMI Some of the key factors that can affect the services PMI include:
New orders: The level of new orders received by manufacturers is a decisive factor affecting the PMI. Higher new orders usually indicate increased demand for goods, which can lead to increased production and a higher PMI reading.
Production levels: The level of production in the manufacturing sector is a key factor in determining the PMI. Higher production levels indicate increased economic activity and can lead to a higher PMI reading.
Employment levels: Employment trends in the manufacturing sector can affect the PMI. The increase in hiring indicates growing business confidence and indicates a positive outlook for the sector, which could lead to a higher PMI.
Supplier deliveries: Fast delivery of raw materials and supplies to manufacturers can provide insights into supply chain efficiency. Delays in supplier deliveries can indicate bottlenecks in production and may lead to a lower PMI reading.
Input prices: Fluctuations in input prices, such as raw materials and energy costs, can affect manufacturing costs and profitability. Changes in input prices can affect production decisions and ultimately affect the PMI.
Export orders: The services PMI in the Eurozone relies heavily on exports. Therefore, trends in export orders and international demand for goods can significantly affect the PMI.
Global Economic Conditions: The performance of the global economy, including major trading partners, could affect the euro’s spot manufacturing PMI. Weaker global economic conditions could weaken export demand and affect the manufacturing sector.
