UK services activity grew at its fastest pace in eight months in October, with the services PMI at 52.8 and the composite at 52.9. Hiring returned, but input costs climbed too, and the data point to a likely Bank of England rate hike.
British services firms reported the strongest growth since the start of the US-Iran conflict in February, helped by rising orders and employment. The S&P Global UK Services PMI rose to an eight-month high of 52.8 from 52.1 in September, a little lower than the preliminary flash reading of 53.1. Readings above 50 denote growth.
The composite PMI, which combines services and manufacturing, rose to 52.9 from 52.0 in September, also its highest reading since February. S&P Global Market Intelligence's Tim Moore attributed greater workloads to an improved pipeline of sales opportunities, particularly those linked to AI investment spending.
Hiring returns, though only marginally
The survey's employment gauge rose by 2 points, moving above the 50-point threshold for the first time since September 2024. ActionForex's summary of the data describes employment returning to growth for the first time in 25 months, driven by renewed hiring in services.
However, job creation remained marginal. Some businesses maintained hiring freezes because of elevated costs, and others cited AI adoption and efficiency improvements as reasons for not replacing departing staff.
Input costs rise faster
Costs moved the other way. Input prices rose in October at the fastest rate since May, although the prices charged index cooled slightly compared with September.
Services input cost inflation accelerated for a third consecutive month to a five-month high, driven by higher fuel, transportation, energy, wage and raw material expenses. Around 38% of surveyed firms reported rising input prices, compared with only 1% reporting declines.
Bank of England decision looms
Tim Moore highlighted the combination of "faster output growth and stronger price pressures," according to ActionForex. He argued it reinforced expectations for a BoE rate hike in November and increased the likelihood of further tightening into 2027.
S&P Global said the report underscored why the Bank of England looks likely to raise interest rates on Thursday, the first increase since 2023.
Sources: Reuters via Investing.com, ActionForex
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