The UK’s dominant services sector, which makes up more than 70 per cent of gross domestic product (GDP), grew strongly in July, with business activity hitting an eight-month high.
The closely-watched Markit/CIPS Services Purchasing Managers’ Index (PMI) reached 59.1 in July, up from 57.7 the month before and the highest reading since last November.
In fact, a spokesman for Markit said that the July PMI showed the sector expanding at a rate rarely seen in the survey’s 18-year history, which is good news for the economy.
He added that the data suggested further strong economic growth in the third quarter of the year, with GDP likely to hit 0.8 per cent over the period if the sector continues to expand at current rates.
The services sector survey results come hot on the heels of the construction sector PMI, which gave a reading of 62.4 and showed that housebuilding growth was at its highest in almost 11 years. Any reading over 50 denotes growth.
It is possible that the better-than-expected PMI will increase the prospects of one or more members of the Bank of England’s nine-strong Monetary Policy Committee (MPC) will vote for a rate rise when it meets for its monthly policy decision this week.
If so, it would be the first time a member voted for a rise since July 2011, when Spencer Dale and Martin Weale voted for a 0.25 per cent increase. Rates have been held at their record low of 0.5 per cent since March 2009. However, the majority of MPC members are expected to vote to keep the rate unchanged.
Meanwhile, heightened expectations of a rate rise, combined with the stronger-than-expected services sector PMI, pushed the pound up against the dollar and the euro.