Britain’s services sector, which accounts for more than 75% of the country’s GDP, had another strong month in April, completing a hat-trick of better than forecast soft economic data in the month, according to the latest PMI data from IHS Markit on Thursday morning.
The services sector — which includes everything from banking to waiting tables — drew a reading of 55.8 in the month, significantly higher than the 55.0 reading in March, and the expected 54.5 forecast by economists.
“UK service providers experienced a sustained rebound in business activity during April, supported by the fastest upturn in new work so far in 2017,” an IHS Markit statement said.
“The latest reading revealed the fastest upturn in service sector output since December 2016. The robust and accelerated rise in services activity was linked to resilient business-to-business demand, new product launches and, in some cases, another rise in sales to overseas clients.”
Services’ acceleration comes in the same week that both the UK’s construction and manufacturing sectors beat expectations, with the combination of the three surveys pointing to GDP growth of 0.6% in the second quarter of the year. That would be double the 0.3% growth announced by the Office for National Statistics for the first quarter last week.
The purchasing managers index (PMI) figures from IHS Markit are given as a number between 0 and 100.
Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the number is, the better things look for the UK.
Here is the chart:
Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, which compiles the survey alongside IHS Markit, said in a statement:
“The UK’s biggest sector started Q2 in stellar fashion with the strongest performance so far this year and with new business growth riding high.
“A supportive economic backdrop helped to boost the UK service sector, with resilient demand reported both at home and from abroad. Going full steam ahead with staff hires rising at one of the fastest rates since last summer, this relieved capacity pressures and provides a signal that service providers anticipate additional growth in the coming months.”
Samuel Tombs of Pantheon Macroeconomics warned against overinterpretation of the data, writing in an emailed note soon after the release (emphasis ours):
“A weighted average of the manufacturing, construction and services PMIs is consistent with quarter-on-quarter GDP growth picking up to about 0.6% in Q2, from 0.3% in Q1. The PMIs’ record of predicting GDP growth, however, leaves much to be desired, and the services PMI does not include the retail sector, which is at the sharp end of the consumer slowdown.”