Upturn in services sector despite sliding business optimism
UK service providers enjoyed an upturn in business activity during August, although business optimism slumped to a five-month low.
The Markit/cips services purchasing managers’ index (PMI) hit 54.3 last month, rising from 53.5 in July, which service providers attributed to “resilient business and consumer demand”.
An index score of more than 50 indicates growth, while a score below that level indicates contraction.
Backlogs of work increased for the fourth month running and employment grew at its fastest rate for six months.
However, business optimism dropped to a five-month low and remained subdued in comparison to the long-run survey average, as the index noted that Brexit uncertainty featured prominently in comments from respondents.
In the UK, the services sector accounts for some three-quarters of the economy, although the PMI metric does not include the vast retail industry.
Chris Williamson, chief business economist at IHS Markit, calledthegrowth“muchneeded welcome news” after disappointing manufacturing and construction PMIS in August.
He added: “Business expectations for the year ahead, meanwhile, sank markedly lower, down across all three sectors to on of the lowest levels seen since the EU referendum, largely reflecting increased anxiety over Brexit negotiations.” 0 Chief business economist at IHS Markit, Chris Williamson