UK service sector growth at eight-month high

A barber cutting a young man's hair Image copyright AFP
Image caption The UK's service sector employment continued to grow

The UK's services sector saw its fastest growth in eight months during April, a survey has indicated.

The Markit/Cips Purchasing Managers' Index (PMI) in April was 59.5, up from March's figure of 58.9. A figure above 50 implies the sector is expanding.

April saw the UK's fastest growth since August 2014, although prices charged by service sector businesses fell for the first time in six months.

Markit said the services sector had now grown for 28 successive months.

Similar surveys had suggested growth in the manufacturing and construction sectors slowed last month.

Markit chief economist Chris Williamson said that, taken together, the surveys suggested "the economy is showing robust growth momentum, expanding at a rate of 0.8% at the start of the second quarter".

However, he added: "Rather than rebalancing towards manufacturing, economic growth has become increasingly reliant on the services sector, and the consumer is having to drive growth as investment spending remains disappointingly weak amid heightened political uncertainty.

"Prices are also falling amid signs of intense competition. The surveys are showing the steepest drop in average prices charged for goods and services since 2009, which will revive worries about deflation."

Martin Beck, senior economic adviser to the EY Item Club, said: "Against a recent run of mixed economic data, a surprise improvement in April's Cips services survey provides reassurance that a decent economic expansion is still on track."

Mr Beck added that the fall in prices uncovered by the survey meant the Bank of England was unlikely to raise interest rates this year.

"This further evidence of a firmly 'noflationary' environment adds more weight to our view that interest rates will be seeing no increase following the MPC's next meeting on 11 May, or in 2015 as a whole."

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