UK: Markit/CIPS PMI survey reveals increased rate of growth in services sector

Increased consumer confidence helped boost spending in the services sector last month.

Increased consumer confidence helped boost spending in the services sector last month. - Credit: PA

Britain’s services sector saw its strongest growth for more than six years during August, according to a survey published today.

The closely watched Markit/CIPS Purchasing Managers’ Index (PMI) for the sector, where any reading above 50.0 represents growth, advanced to 60.5 last month from 60.2 in July.

This confounded a consensus expectation among economists of a slight slowdown in growth and represents the highest reading for the sector since December 2006.

Today’s PMI figure for services represents an eighth consecutive month of growth for the sector and follows upbeat PMI reports for August from manufacturing and construction.

On Monday, the index for manufacturing rose to 57.2, representing highest reading for the sector since February 2011 and the fastest rate of growth since August 1994.

And yesterday, the PMI index for construction showed a fourth consecutive month of expansion, with the increase to 59.1 in August representing the fastest rate of progress in the sector since September 2007.

Martin Beck, UK Economist at Capital Economics, said: “Following surprisingly strong gains in August’s manufacturing and construction surveys, today’s services result at face value points to quarterly GDP growth in Q3 not far off a rip-roaring 2%.

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“However, this does not necessarily indicate that interest rates will have to rise earlier than the MPC expects. In common with the manufacturing and construction surveys released earlier this week, the expansion in services output suggested by the CIPS survey was accompanied by a softening in the survey’s employment balance, which dropped from 53.6 to 50.6.

“This supports our, and the MPC’s, view that rising productivity will accommodate much of the recovery in demand, with the unemployment rate taking a stubbornly long time to fall to the Bank of England’s 7% threshold.”