Britain’s services sector grew at a faster-than-expected rate in November, easing fears of slowing economic recovery in the UK.
Companies in the sector, which includes bars, restaurants, and hairdressers, said they were hiring more people to cope with rising workloads, according to the Markit/CIPS services PMI survey.
In a boost to the chancellor ahead of his autumn statement on Wednesday, economists said growth in new services business was evidence that the UK’s recovery had not petered out in the fourth quarter. The services sector accounts for about three-quarters of the UK economy.
“The pick-up in the UK Markit/CIPS services PMI in November provides reassurance that the UK’s economic recovery has remained strong despite a weaker global environment,” said Samuel Tombs, senior UK economist at Capital Economics.
“Looking ahead, with households’ and firms’ balance sheets in improved health, confidence high and real incomes set to record their strongest growth in more than a decade in 2015, we doubt that the recovery is about to run out of momentum. Our forecast remains for GDP to grow by 3% in both 2015 and 2016.”
The headline PMI index measuring activity in the sector rose to 58.6 in November from 56.2 in October, where anything above 50 indicates expansion. It beat City expectations of a much smaller increase to 56.5.
Chris Williamson, chief economist at Markit, said: “Faster growth of services activity brings welcome news that fears of a potentially sharp slowdown in the economy look overplayed.”
He said that combined with equivalent surveys for the manufacturing and construction sectors published earlier this week, the indication was that growth in the fourth quarter would come in at 0.6%, down from 0.7% in the third.
Employment, new business, and backlogs of work in the services sector all increased at a faster rate in November, and firms were feeling more optimistic about the outlook for business.
The UK economic recovery has been heavily reliant on services - the only major sector of the economy where output has surpassed its pre-crisis peak.
The combined all-sector PMI - including services, manufacturing and construction - rose to 57.8 in November from 56.4 in October. Williamson said: “The upturn in the service sector offset slower growth of factory production and construction activity in November, lifting the overall pace of economic growth from October’s 16-month low.”
