UK’s services boom extends past two years
THE UK and Eurozone’s service sectors are seeing slower growth, new figures show, but are still expanding at levels consistent with robust economic growth.
Markit’s purchasing managers’ index (PMI) – a survey of firms – fell to a score of 57.4 in July for the UK service sector, according to figures released yesterday. It marks a dip from 58.5 in June.
Despite the drop, the figure remains above the 50 score that indicates no growth.
It marks over two and a half years of continuous service sector expansion. The sector accounts for around 79 per cent of the British economy.
The survey means the UK can expect to grow strongly, according to Martin Beck, senior economic adviser to the EY Item Club. However, he warned that other sectors of the economy are struggling.
“The only fly in the ointment is the manufacturing sector, where both the PMI results and official data have pointed to a much weaker performance than that enjoyed by services and construction, suggesting that the two-speed economy remains a key theme,” he said.
Exports, in both services and manufacturing have been held back by weak growth in the Eurozone and a strong pound. The Eurozone buys nearly half of UK exports while the pound has risen against the euro by around 16 per cent since January.
But the prospects for Eurozone growth are starting to look up. The Eurozone’s service sector PMI edged down to 54 in July from 54.4 in June. While the survey indicated that growth in the Eurozone’s service sector had slowed, it is only slightly less than June’s four-year high.
It was led by Spain, which saw the sharpest rise in employment since 2007 as its PMI climbed to 59.7.
The data points to economic growth of 0.4 per cent in the three months to June, with the same rate of growth continuing into July, said Markit chief economist Chris Williamson.
A similarly bullish outlook is seen by RBC Capital economist Timo del Carpio.
It would mark a sustained improvement in growth for the currency-bloc, which flirted with a third recession in six years towards the end of last year. The Eurozone’s service sector is also suffering from weak demand from abroad.
Economists point to a slowdown in China, the world’s second largest economy, as a reason why demand for exports from both the UK and Eurozone are waning.