UK services sector growth hits four-month high in April

Growth in the UK services sector hit a four-month high in April, according to data released on Thursday.

The Markit/CIPS services purchasing managers' index rose to 55.8 from 55.0 in March, beating expectations for a decline to 54.5 and above the 50 mark that separates expansion from contraction for the ninth month in a row. The reading also marked the fastest upturn in service sector output since December 2016.

UK service providers experienced a sustained rebound in business activity, supported by the fastest upturn in new work so far this year, while job creation rose to a four-month high on the back of renewed pressures on operating capacity.

Service providers said they were confident about their prospects for growth over the year ahead, but the degree of optimism moderated for the third month in a row.

Chris Williamson, chief business economist at IHS Markit, said: "The upturn in the services PMI rounds off a hattrick of good news after upside surprises to both the manufacturing and construction PMIs. The three surveys collectively point to GDP growing at a rate of 0.6% at the start of the second quarter.

“While we expect consumer spending to slacken in coming months, with the April survey highlighting continued weakness in sectors such as hotels, restaurants and other household-facing businesses, there’s good reason to believe that at least 0.4% GDP growth can be achieved in the second quarter as a whole."

Howard Archer, chief UK and European economist at IHS Markit, said: "An improved services sector report completed a hat-trick of purchasing managers’ surveys for April and fuel belief that the economy saw a spike back up in activity at the start of the second quarter after growth slowed sharply to 0.3% quarter-on-quarter in the first quarter from 0.7% quarter-on-quarter in the fourth quarter of 2016. It is also notable that a CBI survey showed a marked pick-up in retail sales in April.

"The pick-up in services activity in April is particularly notable as it was a clear loss of momentum in the sector that was the main factor behind the first-quarter growth slowdown. It is particularly the consumer-facing services sectors that have been finding life more difficult."

The pound popped higher after the services data, trading up 0.2% versus the dollar to 1.2889, having been around the 1.2855 mark earlier.