Service sector growth slowed slightly more than expected last month, but new business expanded briskly and companies put up prices at their fastest pace in five months, a survey showed yesterday.
The Chartered Institute of Purchasing and Supply/RBS said its index of services business activity fell to 55.8 in November from 56.1. That was lower than analysts' forecasts of 56.0, but well above the 50 mark that divides expansion from contraction.
"The reading is still high, and a rise in new orders spells better news ahead," said Gavin Redknap, economist at Standard Chartered Bank.
"The result will do little to alter near-term policy from the Bank of England, which has pointed out that it will wait for the results of the Christmas shopping period and wage bargains in January before considering further rate moves."
While weakening oil prices pushed the input prices index down to a four-month low of 57.8 from 59.2 in October, the prices charged index rose to a five-month high of 52.5 in November from 52.2.
"Healthy market demand was reported in some cases to have afforded the opportunity for output price hikes in November," CIPS said.
CIPS added that there were some reports that higher wages had added to companies' cost burden.
The new business index rose to 56.3 in November from 55.9, with just under a quarter of firms surveyed reporting a rise in business, while only 11 per cent reported a decline.
And strong demand boosted firms' expectations for the next 12 months, with the business expectations index rising to 72.7 from 72.0 in October.
But firms' optimism was not reflected in their staffing levels, with the employment index down to 51.2 from 51.9 in October - its lowest since February.
Activity was underpinned by new project starts and increased marketing, as well as new contract wins.
Roy Ayliffe, director of professional practice at CIPS, said: "Purchasing managers saw a further increase in business activity in the United Kingdom services sector in November, but at a slightly softer rate than October's three-month high.
"November's growth was mainly driven by the securing of new contracts, with the strongest gains recorded in business to business services, IT and computing and transport and storage industries.
"Encouragingly for service providers, input price inflation eased off to a four-month low as a result of weaker oil prices.
"However, purchasers still struggled to keep overall costs down amid reports of high energy and fuel prices and increased labour costs.
"Overall, new contract wins and the expectation of converting business leads into hard sales kept spirits about the sector's future high."