Data published on Monday show the UK is growing at a rate far better than expected.
The Markit/CIPS UK services sector Purchasing Managers Index (PMI) – a combination of the services and manufacturing sectors – recorded growth of 60.2 in July, up from 56.9 in June and well above the 50 mark which signals the difference between contraction and growth.
The services sector, which makes up more than three-quarters of Britain’s economy, grew last month at a faster pace than in any other major economy. It expanded at the fastest rate in more than six years in July. The Office for National Statistics has reported UK industrial production rose by a better-than-expected 1.2 per cent annually in June following a 4.3 per cent fall the month before.
The manufacturing sector also expanded at a figure that was the highest in the world and smashed expectations with a 2.0 per cent increase following a 2.9 per cent fall in May. Alongside this, Industry data shows the biggest real increase in retail sales in July for two years.
This news shows that Britain’s economy is growing at a far faster rate over the summer, prompting speculation that the UK is heading for full recovery. The strong figures offer a glimmer of hope that the six consecutive quarters of economic contraction may be finally coming to an end.
The eurozone’s recession could end in the third quarter as businesses return to growth, with Britain leading the way.
This data arrives at a major time in the UK. On Wednesday, The Bank of England will publish its most important quarterly ‘inflation report’ in years. New governor Mark Carney, is set to unveil an agenda regarding ‘forward guidance’ on how long the Monetary Policy Committee aims to keep interest rates at these record low levels.
The economy still remains fairly fragile but this data is positive in the re-building of the economy after the financial crisis. Paul Smith, a senior economist at Markit, a data firm which produces the PMI alongside the Chartered Institute of Purchasing & Supply, a trade body, suggests, “What will be key is when we start to see a rise on wages and meaningful job creation. That’s a little bit further out at this stage.”
