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Sunny aspect for UK services


Sunny aspect for UK services


Britain’s dominant services sector enjoyed a summer spurt of growth.

It expanded at its fastest pace in more than six years in July, which suggests the economic recovery there is building momentum.

The services purchasing managers’ index – based on a monthly industry survey – has now been above the level that divides growth from contraction for seven months.

Both new orders and business confidence improved last month. Indeed new orders hit their fastest pace since November 2006.

Firms did though point out that some of July’s strength was due to unusually warm weather.

The latest rise follows strong gains in surveys of manufacturing and construction firms.

“Although an early call on one month’s data, the forward-looking elements from the survey point to a further strengthening of GDP in Q3 as the UK heads towards ‘escape velocity’ and self-sustaining economic expansion,” said Paul Smith, senior economist at survey compilers Markit.

The signs of expansion could however create problems for the Bank of England’s new governor Mark Carney, who has to decide on a commitment to low interest rates at a time when the economy may be about to make a more rapid recovery.

Questions about the sustainability of future growth are also likely to persist. Recent growth appears to have been driven by consumers reducing the amount they save, and temporary government schemes to boost the housing market.

“A full and real recovery for many people will be one that results in meaningful job creation, a strengthening in real wages and an associated improvement in living standards which have been under substantial pressure in recent years,” said Markit’s Smith.

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