Services sector at ten month high

GOOD SERVICE: The services sector grew at its fastest pace in ten months in August, according to a report

GOOD SERVICE: The services sector grew at its fastest pace in ten months in August, according to a report

First published in Business News The Northern Echo: Photograph of the Author by

THE UK services sector grew at its fastest pace in ten months in August.

The Markit/CIPS services purchasing managers' index (PMI) registered a reading of 60.5 last month.

That figure was up from 59.1 in July, and well above the benchmark of 50 used to indicate growth.

Allied to further PMI surveys on the UK construction and manufacturing industries, the figures indicate the economy grew at its fastest rate since last November.

The services sector accounts for more than three-quarters of the UK's economy and includes banks and high street restaurants.

Chris Williamson, Markit chief economist, said he expected another quarter of strong growth in the third quarter, similar to the 0.8 per cent expansion seen in the first two quarters of the year.

He added the performance will lift pressure on discussions by Bank of England policymakers after their first split decision on interest rates.

He said: “An acceleration of growth in the services sector and an ongoing construction boom offset a weakened performance in manufacturing.

"The three PMI surveys indicate the economy grew at the fastest rate since last November.

"However, the worry is growth remains too dependent on the domestic economy, raising the risk that higher interest rates will derail the upturn.

"Any hopes of a re-balancing towards exports have been dealt a blow by the escalating Ukraine crisis.

“Dovish policy makers will worry the Ukraine crisis will also filter through to a significant slowdown in services and construction.

"Some impact is already evident, with growth of new orders and employment moderating in all three sectors in August."

David Noble, CIPS chief executive, also warned there were signs services growth may be close to peaking, with confidence among firms weakening to a 15-month low due to worries over the strength of business pipelines.

He added: "There are signs the sector is feeling the pinch from capacity pressures as backlogs of work lengthen.

"The outlook is not as bright as previous months, as a mixed bag of concerns, principally over how robust the business pipeline will continue to be, resulted in confidence declining."

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