Service sector leads way again in growth

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Britain’s dominant services sector bounced back in November to post better than expected growth, suggesting fears of a sharp slowdown in the economy have been “overplayed”.

The sector, which represents more than three-quarters of UK output, gave a reading of 58.6, according to the CIPS/Markit purchasing managers’ index survey – where 50 separates growth from contraction.

It was an improvement on the previous month’s figure of 56.2, a 17-month low, and boosts hopes for sustained growth.

A combined output reading from the main sectors of the economy of 57.8 suggests overall growth picking up again 
after a slowing in the prior two months.

It pointed to growth of 0.6 per cent in the fourth quarter, a decline from 0.7 per cent in the previous period but still “impressively robust” and indicating three per cent growth for the year, according to Markit chief economist Chris Williamson. He said: “Faster growth of services activity brings welcome news that fears of a potentially sharp slowdown in the UK economy look overplayed.”

The overall survey also pointed to 200,000 jobs being created in the fourth quarter, suggesting a continued fall in the rate of unemployment, Mr Williamson said.

However, there was more gloom from the eurozone, with separate figures showing the pace of economic growth easing to a 16-month low in 
November.

In UK services, jobs growth was at its best level since 
July as firm demand and rising volumes spurred businesses to add to their payroll numbers.

Companies were seeing higher wage bills but these were partly offset by lower fuel costs, the survey found.

The headline reading from the sector was the 23rd month in a row it had shown growth.

Data from elsewhere in the economy this week showed a pick-up in manufacturing but a slowdown in the construction sector.

Samuel Tombs, of Capital Economics, said the services data “provides reassurance that the UK’s economic recovery has remained strong despite a weaker global environment”.

ING economist James Knightley said that despite the pick-up, subdued inflation pressures amid plunging petrol prices and the supermarket price war suggested little imminent pressure for the Bank of England to raise interest rates.

However, Alan Clarke, of Scotiabank, said the improved data suggested waiting another year for a hike looked “a little excessive”.