UK Services PMI Beats Expectations in August

• UK Services PMI Beats Expectations in August

Uk service providers experienced a surge in business activity during the month of August.

According to IHS Markit report, Services Purchasing Managers’ Index climbed from 53.5 in July to 54.3 in August. The second highest level since February 2018 and better than the 53.9 predicted by analysts.

The headline index has been above the 50 level that separates expansion from contraction since August 2016.

Businesses in the sector attributed the surge in business activity to consumer demand and resilient business. The sector was more upbeat than the manufacturing and construction sectors that expanded below expectation during the same month.

Chris Williamson, Chief Business Economist at IHS Markit said: “Faster service sector growth comes as much needed welcome news after disappointing manufacturing and construction PMI surveys in
August. The survey data indicate that the economy is on course to expand by 0.4% in the third quarter, a relatively robust and resilient rate of expansion that will no doubt draw some sighs of relief at the Bank of England after the rate hike earlier in the month.”

However, despite the rise in prices due to higher salaries and fuel cost, output prices were modest as companies hesitated to pass on costs.

The report also shows business confidence was lower than the average survey, representing the weakest since March as uncertainty surrounding Brexit negotiation continued to weigh on operations.

Still, new orders picked up slightly in August but softer than the average trend recorded since the current expansion began in August 2016.

The pound extended its loss against the US dollar to 1.2825 after the report.