UK's services sector rebounds

The much-needed boost came as businesses recorded stronger output in August.

by Elizabeth Anderson
Last Updated: 05 Dec 2012
Despite the recent jump in August output, things are tough for manufacturing. But thankfully there was some better news from Britain’s services sector today.

The services sector – which includes everything from hairdressing and hotels to banks and restaurants – picked up in August as companies won new customers and the improved weather boosted output.

The closely-watched Markit/CIPS purchasing managers index (PMI) for services activity came in at 53.7 in August, the highest reading since March. It was a rise on the 51.0 recorded the previous month and came after disappointing data from construction and manufacturing surveys released earlier this week.

A reading above 50 indicates growth so the uplifting data from the services sector suggests the country could be on its way to crawling out of recession. But it came with a warning from Markit’s chief economist Chris Williamson, who questioned whether the bounce-back could be sustained.

‘It is concerning that the upturn in activity was not matched by a similar rise in hiring, with employment in the service sector instead growing at the slowest pace since February,’ Williamson said.

The UK is currently in the longest double dip recession for more than 50 years. GDP contracted 0.5% between April and June, the latest update from the Office for National Statistics showed.

But economists predict a better third quarter after the figures in the second quarter were skewed by a number of one-off factors. The extra bank holiday over the Queen's Diamond Jubilee, along with unusually cold and wet weather, put a dampener on output between April and June (yes the same old weather excuses again…). Nevertheless, all eyes on Q3 for that much-needed economic rescue.

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