Britain’s services sector, which accounts for more than 75% of the country’s GDP, is fought back in March, but there are troubling times ahead, according to the latest PMI data from IHS Markit on Wednesday morning.
The services sector — which includes everything from banking to waiting tables — drew a reading of 55.0 in the month, significantly higher than the 53.3 reading in February, and the expected 53.5 forecast by economists.
“March data pointed to a rebound in UK service sector growth, with business activity and incoming new work both rising at the strongest rates so far in 2017,” an IHS Markit release said.
“Survey respondents also remained optimistic about the year-ahead business outlook, with almost half of the survey panel forecasting growth while only one-in-nine expect a fall in activity.”
Beyond the headline figure, however, there is much to be concerned about, IHS Markit said.
“However, intense cost pressures continued in March, which led to the fastest rise in prices charged by service sector firms since September 2008,” the release noted.
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 IHS Markit’s chart of the PMIs longer-term trend (note the recovery in March):
Commenting on the data, IHS Markit’s chief business economist Chris Williamson notes that while the recovery since February is significant, there are still worrying signs in the services sector, saying:
“The March uptick in the PMI surveys merely brings the data in line with a neutral policy stance at the Bank of England. As such, the data add to the sense that, with economic and political uncertainty likely to intensify as the Brexit process gets underway, policymakers are likely to continue to stress the need to look through any further upturn in inflation and focus instead on the need to keep policy on hold to support economic growth.”
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