Sustained rebound in services activity raises chance of growth
ACTIVITY in Britain’s services sector expanded in August at its fastest level in almost two years, a survey showed yesterday, raising hopes that the UK will exit recession in the third quarter.
The CIPS/Markit services purchasing managers’ index (PMI) rose to 54.1 from 53.2 in July, above consensus expectations of 53.9.
The boost came from solid gains in new business and backlogs falling at an accelerated rate. But this was in part driven by price discounting, amid reports that the marketplace remained competitive and underlying demand was still fragile.
A weighted average of the main activity balances of the three surveys is now consistent with quarterly GDP growth of around 0.2 per cent.
The rebound is evident in services as well as manufacturing, which indicates that the recovery reflects some improvement in final demand and not just less destocking.
However, Capital Economics’ Vicky Redwood said: “Surveys have recently been too upbeat relative to the official data. Accordingly, it would be premature to conclude that the recession is definitely over”.
Across the Atlantic, the ISMnon-manufacturing survey recorded 51.3 – above the 50 mark that signifies growth – while the composite index showed a rise to an 11-month high of 48.4.