Services PMI rockets to 62.5 – its highest for 16 years

The UK’s services industry has seen a huge boost, with services PMI for October flying past expectations at 62.5 – the highest rise in activity since May 1997. Expectations were 60.4, from September’s 60.3.

The sharp rise was supported by a strong increase in new work, with backlogs of work and employment both increasing markedly.

Markit, who compile the survey, said:

Service sector activity has risen continuously throughout 2013 to date and generally at an accelerated rate. This has largely been the result of rising levels of incoming new business placed with service providers as market sentiment has improved in line with a strengthened economic climate.

Cost inflation accelerated to its highest in eight months on the back of higher energy, fuel and utility bills. Wages were also reported to be higher on average.

Steady growth rate has meant service providers have been confident enough to partly reflect higher costs in their prices, says David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply.

Chris Williamson, chief economist at Markit, comments:

The buoyant survey data are likely to encourage the Bank of England to raise its forecasts for economic growth when it publishes its new projections in November. The Bank is also likely to bring forward its expectation of when unemployment will fall below seven per cent, the threshold needed to be reached before the Bank will consider raising interest rates.