Growth in the UK’s service sector, which accounts for more than 75 per cent of GDP, slowed unexpectedly in January but activity is still strong and the indications are that the economy is picking up speed for the first quarter of 2014.
According to data company Markit, the Purchasing Managers’ Index (PMI) fell to 58.3 last month compared with a reading of 58.8 in December, the seventh consecutive fall since June 2013. However, any number above 50 denotes growth, which is still firm.
The main reason given for the fall was that businesses have been struggling to find the right workers to keep pace with demand. However, while new business growth slowed, the survey reported that there was clear evidence that companies were now “converting enquiries into hard contract wins”. It also said that more companies reported a rise in overseas orders.
Similar surveys from Markit this week indicate that growth is now more widespread, with activity in the construction industry growing at its fastest pace in over six year and manufacturing growth remaining firm.
The PMI Index for construction rose to 64.6 in January, up from 62.1 in December, giving the strongest reading since August 2007. In fact, it was one of the highest figures since the survey began in 1997, led mainly by an increase in house building.
Meanwhile, the manufacturing sector’s Index slipped to 56.7, down from December’s 57.2, but new orders from both home and abroad flooded in at a faster rate, boding well for better results in the months to come.
With these survey results, the indications are that the UK is on course for quarterly GDP growth of 0.8 per cent in the first three months of 2014, an increase from a preliminary reading of 0.7 per cent in the fourth quarter of 2013.