UK service economy hits 16-year high: Markit
New business activity helped the UK service economy accelerate at the fastest pace in more than 16 years, according to Markit Group. The October PMI reading of 62.5 exceeded forecasts, which called for a slight drop-off in service activity over the previous month.
British employers increased payrolls to account for incoming new business, which grew at record levels in October. “With capacity being tested, firms have sought to keep increasing their staff numbers, with employment levels rising for a tenth consecutive month,” said David Noble of the Chartered Institute of Purchasing & Supply. Higher workloads boosted sentiment toward current and expected economic activity, with half of all managers saying they expect a rise in business activity a year from now. Employers are confident new business will be driven by domestic and international demand.
The service economy has been expanding at a rapid pace in 2013, due in part to improved business sentiment and growing business ventures. The service economy joins manufacturing and construction in the growth column, suggesting the UK economy is on its way to a stellar quarter.
“Confidence is high that this run of growth can be maintained throughout the final quarter, underpinned by the stable economic climate and improvements in the housing market,” Noble also added.
The growth in service activity has raised expectations for another large jump in economic growth in the final quarter of 2013, as the UK continues to pull away from the rest of Europe. The European Commission expects the UK to grow 2.2 percent in 2014, double the pace of the euro area. The Confederation of British Industry has also increased is growth forecast for the UK economy this year and next.
The UK economy’s accelerated rate of growth could prompt the Bank of England to raise its forecasts and revise its forward guidance. BOE Governor Mark Carney will publish the central bank’s revised growth projections next week.
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