Growth in Britain’s services sector rises to eight-month high in June says closely followed survey, IHS Markit purchasing managers’ index (PMI)
Britain’s services sector continued a run of improving performance in June as activity hit its highest level since October 2017, boosting hawks at the Bank of England who believe a rate hike in August is necessary.
The services purchasing managers’ index (PMI) rose to a seasonally adjusted reading of 55.1 in June, up from 54 in May, data firm IHS Markit reported today.
Firms reported the strongest increase in new work in over a year.
The sign of increased growth momentum in the large survey will give a boost to the Bank of England’s monetary policymakers, who are betting that the slowdown in growth during the first quarter was only temporary. UK GDP expanded by 0.2 per cent, revised figures show.
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The PMI data will take on unusual importance for the Bank of England because of a quirk in the Office for National Statistics’ publishing schedule which will mean there is no second-quarter GDP data before the next monetary policy committee (MPC) meeting.
Chris Williamson, chief business economist at IHS Markit, said: “Stronger growth of service sector activity adds to signs that the economy rebounded in the second quarter and opens the door for an August rate hike, especially when viewed alongside the news that inflationary pressures spiked higher.”
The growth of the services sector had improved over the last two months following a weather-affected March, when the so-called Beast from the East froze activity. In June, by contrast, some firms reported that “unusually favourable weather conditions” have boosted consumer spending.
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Inflationary pressures also appeared to build, with firms reporting higher staff salaries, alongside increasing fuel bills. “In some instances, service sector firms commented that high levels of capacity utilisation had provided an additional reason to pass on greater costs to new clients,” IHS Markit said.
The improvement in activity “raises the chances that the MPC will vote to hike interest rates in August,” said economist Ruth Gregory of Capital Economics. “The all-sector PMI rose from 54.3 to 55.0, suggesting that quarterly GDP growth has accelerated to 0.4 per cent or so in the second quarter – up from 0.2 per cent in the first quarter and in line with the MPC’s forecast.”
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