UK service sector grows at stronger pace

| August 3, 2011
”UK

Growth in the UK’s closely-watched service sector grew at the strongest pace in 4 months in July, figures have revealed today.

The Chartered Institute of Purchasing and Supply (CIPS)/Markit purchasing managers’ index (PMI) surged to 55.4 last month from June’s reading of 53.9.

The rise was unexpected after analysts had expected the index to fall to 53.2.

Meanwhile, the index continues to remain above the crucial 50 level, which separates growth from contraction.

The survey covers businesses making up around 40% of the economy, but does not include retailers or the public sector.

Paul Smith, Markit’s Senior Economist, comments: “Given the headwinds of austerity at home and the ongoing public debt issues in major export markets, the scenario of a continued choppy recovery would, at the present time, be the best forecast for the sector’s performance in the coming months.”

The figures come shortly after it was revealed UK manufacturing activity contracted in July – the first time since the UK was in recession two years ago.

The closely-watched CIPS/Markit manufacturing PMI fell to 49.1 last month from June’s reading of 51.4.

The index is now below the crucial 50 mark, which separates contraction from expansion.

The manufacturing sector, which accounts for around 13% of economic output, has been one of the bright spots in the UK economy but the recent figures have raised fears about the strength of the economic recovery.

Meanwhile, figures yesterday revealed growth in the UK construction industry slowed in July.

The PMI dipped to 53.5 in July from June’s reading of 53.6 – however, the figure beat expectations of a reading of 53.0.

Construction accounts for around 6% of Britain’s economic output.

According to Markit, the three sets of figures suggest the economy grew by 0.5% in the three months to July – an improvement on the 0.2% growth in the April to June period.

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