UK services sector expansion at eight-month high

Gurjit Degun
5 August 2014

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5 August 2014 | Gurjit Degun

Activity in the UK services industry is rising at a faster pace, reaching an eight-month high in July.

The Markit/CIPS UK Services Purchasing Managers’ Index (PMI) posted 59.1 against the 50 baseline, indicating expansion. In June, the PMI recorded 57.7.

Survey respondents said the launch of new services, increased marketing and greater opportunities to tender for business as factors underpinning the rise in activity.

A “considerable increase” in new work also drove activity up over July. Anecdotal evidence noted client confidence has risen, and there is a willingness to commit to new contracts.

The growth of payroll numbers remained elevated, despite easing on June’s survey record. Buyers reported companies took on staff to help keep on top of current workloads and in anticipation of further growth.

The PMI also found backlogs of work rose at a “marked and accelerated pace” during July.

Markit chief economist Chris Williamson said: "The survey data point to the growing likelihood of yet another strong economic expansion in the third quarter. We would expect to see GDP rise by 0.8 per cent again if the surveys hold their current levels.

“The sustained strength of growth will add to calls for interest rates to start rising later this year. However, with prices charged for services rising only very modestly again in July, an absence of inflationary pressures means there is still a strong case for any tightening of policy to be delayed until 2015.”

David Noble, group CEO, CIPS, added: “With backlogs rising, service providers have taken up the capacity challenge, investing in new roles and even starting to increase wages this month. As the labour market tightens this trend is set to continue, putting pressure on the Bank of England to head off inflation when it meets to discuss interest rates on Thursday.”

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