Services sector shows economy ‘regaining momentum’

Growth in the services sector came in ahead of economists' forecasts. Picture: Toby Williams

Growth in the services sector came in ahead of economists' forecasts. Picture: Toby Williams

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Output in Britain’s powerhouse services sector continued to recover last month from a contraction after the Brexit vote, as new business expanded at its fastest pace since February.

The closely watched Markit/Cips services purchasing managers’ index (PMI) showed a reading of 52.6 in September, down from 52.9 in August but above economists’ expectations of 52. A reading above 50 indicates growth.

The update comes after the industry, which accounts for three-quarters of the economy, slumped in the first month after Britain voted to leave the European Union, hitting 47.4 in July.

Yesterday’s latest PMI report said September’s reading was weak compared with previous performances, coming in below a long-run level of 55.1.

READ MORE: Economic growth upgraded as services defy Brexit fears

It meant services activity – including retail, transport, hospitality and IT – hit an average of 50.3 for the third quarter, its lowest for four years.

Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey, said: “The survey results suggest that the economy has regained modest growth momentum since the EU referendum, with further service sector expansion accompanied by a return to growth in construction and a strong revival of manufacturing.”

He added that the survey “will cast doubt on the need for any further stimulus from the Bank of England in the coming months”.

When the BoE cut rates by a quarter point last summer it hinted it might cut again to near zero per cent.

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