UK Services Sector - Cautious optimism is the message coming from economics experts this month as new data reveals that the UK services sector has achieved its greatest growth rate since March 2012.
The UK Services Sector Accounts for Three-quarters of Economic Output
Incorporating sectors such as financial and business services, IT and computing, hotels and restaurants, transport, storage and communication. The data from this sector revealed by the
Markit/CIPS Services Purchasing Managers' Index (PMI) ndicated a growth to 54.9 this May from 52.9 in the previous month. With any figure above 50 considered to show growth, it certainly appears to be a positive outlook, particularly when combined with similarly good news from equivalent reports from both the construction and manufacturing sectors earlier in June.
Figures from the manufacturing sector showed the greatest growth in a year
Data indicated that orders were on the rise as well as production rates. Growth in this UK services sector has been attributed to the UK market rather than being driven internationally. A slight reduction in the cost of raw materials contributed to a generally positive outlook in manufacturing.
PMI figures in construction showed some growth for the first time in six months and also indicated that home building was at its busiest in over two years. Despite impressive results, experts in the industry still expressed concern that the figures indicated a reliance on house building over commercial activity.
Growth from the three core industries in the UK, the services sector, construction & manufacturing
The growth figures seen from the three core industries in the UK, the services sector, construction and manufacturing represent the best increase in the three years since the current government took office. A general air of positivity has led to an increase in recruitment based on an optimistic view of future income and not necessarily on current status.
While the Markit data revealed very positive signs of improvement in the UK services sector, other experts urge caution and the FTSE failed to reflect quite such a rose-tinted view of the economic future, with the index closing down by 1.5%. Commentators have said that the Markit data is based on managers' responses to surveys rather than physical output. The level of UK output is still behind that of its pre-recession figure, although growth in employment was at its greatest for three months.
First-quarter growth for the UK was 0.3%. Given the latest figures and the improving trends in various sectors, the Chancellor is likely to be more positive about achieving equivalent or greater growth in the second quarter.
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