Service sector serves up fastest growth for six years

The Purchasing Managers' Index for the services sector rose at its fastest pace since December 2006 in July, according to research by Markit.

by Gabriella Griffith
Last Updated: 06 Aug 2013
The service sector expanded at its fastest pace since before the recession, new research suggests, prompting jubilant claims the economy is well on the way to recovery.

Markit's Purchasing Managers Index rose to 60.2 last month, up from 56.9 in June – a stronger result than economists were anticipating (NB - anything below 50 is a contraction). The result is the third positive PMI figure for the month of July, following strong growth in both the construction and manufacturing sectors, which were revealed last week.

The UK services sector has been performing well so far this year, with the index above the 50 mark for the past seven months.

‘The forward-looking elements from the survey point to a further strengthening of GDP in Q3 as the UK heads towards 'escape velocity' and self-sustaining economic expansion,’ said Paul Smith, senior economist at survey compilers Markit.

Or - if you enjoy your economic analysis less convoluted - it looks like we’re on the mend.

In another plume of positivity this morning, optimism has risen among manufacturers for the first time since last April, according to a survey by the CBI. Positive sentiment about the general business situation rose 9%, while optimism about export prospects was up 4%.

The change of heart comes despite weak activity over the past quarter, with more manufacturers reporting a decrease in orders than an increase.

‘Despite another disappointing quarter for small and medium-sized manufacturers, with output continuing to fall, optimism about the general business situation has risen for the first time since spring last year,’ said Anna Leach, CBI Head of Economic Analysis.

‘Firms expect demand to improve both at home and abroad and production to stabilise over the next three months. But manufacturers remain concerned about the impact of political and economic conditions overseas on external demand, reflecting on-going uncertainty about the global economic outlook.’

Optimism and service sector performance might be riding high in the UK, but things aren’t looking so rosy on the other side of the channel.

The Eurozone’s services index has revealed a contraction, with an index of 49.8 and there have been reports French tourism has taken a battering. Consultancy Protourisme has said bookings are down 4.5% on last year and the French Union of Hotel and Restaurant Owners said takings had fallen 10% in July. Sacrebleu.

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