U.K. service sector growth hits 17-month high in December on sharp rise in new businesses

Growth in the United Kingdom’s services sector has hit a 17-month high during December, following the sharpest rally in new businesses since July 2015. Also, output price inflation hit 68-month record high during the period.

The survey’s headline figure is the seasonally adjusted Markit/CIPS Services PMI Business Activity Index remained above 50.0 for the fifth consecutive month in December, indicating a continued recovery in growth following a contraction in July linked to the EU referendum.

Moreover, the index rose for the third consecutive month to 56.2, from 55.2, signalling the fastest expansion since July 2015. The rate of growth was also sharper than the 20-year long-run survey average.

Growth of employment was maintained for the fifth month running in December. The rate of job creation was unchanged from November’s 7-month high, remaining stronger than the long-run survey average. Also, cost pressures remained elevated at the end of 2016.

Business expectations strengthened in December as firms reported planned marketing efforts, new products, export opportunities, acquisitions and new business premises.

"At face value, this improvement suggests that the next move by the Bank of England is more likely to be a rate hike than a cut, but policymakers are clearly concerned about the extent to which Brexit-related uncertainty could slow growth this year," said Chris Williamson, Chief Business Economist, IHS, Markit.

Meanwhile, GBP/USD traded at 1.23, down -0.11 percent, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -5.26 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex