An unexpected rise in UK service sector activity in September has given an extra lift to the market.
The FTSE 100 is now up 34.44 points at 5590.41, as the Markit/CIPS services PMI showed a reading of 52.8, up from August's 16-month low of 51.3 and better than forecasts of 51. Sterling edged higher on the news, while gilts pared their earlier gains. Economists said the figures should ease worries - for the moment - about a double dip recession in the UK. However the survey also showed the weakest inflow of new business in a year, suggesting the improvement in activity may not last long. The Bank of England meets this week and is widely expected to keep interest rates on hold, although analysts are keen to see what comments it makes about any further quantitative easing. Howard Archer, chief economist at IHS Global Insight, said:
The September services sector survey is better than expected overall so modestly dilutes some of the worst of the near-term fears over the economy. Nevertheless, it is evident that GDP growth in the third quarter was much reduced from the 1.2% quarter-on-quarter rate achieved in the second quarter (we estimate growth was around 0.4-0.5%) and the concern remains that growth will slow further as the fiscal squeeze increasingly bites. Slowing global growth is also a worry for growth prospects.
The serviced survey reinforces our view that the Bank of England will keep interest rates down at 0.50% on Thursday but will hold off from reviving quantitative easing for the time being at least.
Later today comes a similar survey from the US, as well as a consumer confidence index, but the main US economic data will come on Friday with the non-farm payroll numbers.
.png?w=600)
