UK services accelerate on domestic demand

AUK services gauge rose more than economists forecast in November as new business picked up.

Markit Economics’ purchasing-managers’ index rose to 55.9 — indicating the fastest pace of growth in four months — from 54.9 in October. Economists in a Bloomberg survey had forecast a reading of 55.

The survey suggests Britain’s consumer-driven economy is weathering the global headwinds flagged by the Bank of England last month, with the services index remaining well above the 50-level that divides expansion from contraction. Markit said its latest surveys combined show economic growth is on course to accelerate to 0.6 per cent in the fourth quarter. An increase in input prices last month was linked to firms preparing for the introduction of a higher minimum wage, according to the report published yesterday in London.

The UK “continues to enjoy the ‘Goldilocks’ scenario of solid economic growth and low inflation,” said Chris Williamson, an economist at Markit in London. “The upturn in earnings growth raises question marks over just how long inflation, and therefore interest rates, will remain low for.”

The volume of new business rose at the fastest pace in four months, Markit said, as firms introduced new products and gained confidence in the global economy. Nevertheless, business expectations remained near a 2 1/2-year low and employment growth slowed.