UK services sector picks up momentum in October

The latest Markit/CIPS UK survey showed the index monitoring growth in the services sector rose from 53.3 in September to 54.9 last month, registering its first increase since June and remaining above the 50.0 threshold that indicates expansion for the 34th consecutive month.

The latest figure was broadly in line with the long-run survey average of 55.2, and indicative of a strong overall rise in business activity at service providers, although the pace of expansion was the second-weakest since May 2013.

“We expect to see this improvement continue in coming months, given strong growth in real wages, historically-high levels of confidence and stimulatory monetary conditions,” said Scott Bowman, UK economist at Capital Economics.

“As a result, we remain confident that growth will reverse its temporary slowdown seen in the third quarter and maintain a reasonable pace over 2016.”

The volume of new business received by UK service providers increased for the 34th successive month, as firms reported growth from both new and existing customers, while employment in the sector increased as it has done since January 2013, with the pace of job creation hitting a five-month high.

Business expectations remained firmly positive in October, but softened for the sixth time in seven months to the weakest since April 2013.

Meanwhile, the composite PMI index rose from 53.3 in September to 55.4 last week, beating analysts’ expectations for a 53.6 reading.

“A faster rate of expansion in service sector activity accompanied the steep upturn in manufacturing growth and robust construction sector growth reported earlier in the week,” said Markit’s chief economist Chris Williamson.

“The survey data point to GDP rising at a quarterly rate of 0.6% at the start of the fourth quarter, up from 0.5% in the third quarter.”