UK services industry PMI rebounds in August

LONDON: Britain’s services industry bounced back strongly last month from a slump triggered by June’s vote to leave the European Union, a closely watched survey showed, reducing the likelihood of a recession.

The survey echoed the upbeat tone of numbers released last week on the manufacturing and construction sectors in August.

But overall economic growth still looks set to slow sharply, keeping alive the prospect of another Bank of England (BoE) rate cut before the end of the year.

The Markit/CIPS Purchasing Managers’ Index (PMI) for the services sector jumped to 52.9 in August from July’s seven-year low of 47.4, the biggest one-month gain in the survey’s 20-year history and one which beat all forecasts in a Reuters poll.

Sterling rallied by almost half a cent to hit a seven-week high against the US dollar, and British government bonds trimmed earlier gains.

“The survey data is very useful in giving us a feel for how the economy is doing in the short term, but in this case I think it might pay to be a bit more cautious,” RBC economist Sam Hill said, adding the PMI data seemed volatile and he would look for official output data for July later this week.

Last week, PMIs for the much smaller manufacturing and construction sectors showed similar gains to the services PMI, boosting August’s all-sector PMI to a five-month high of 53.2.

However, given the weakness in July, economic growth in the third quarter overall was likely to be just 0.1%, survey compilers IHS Markit said.

“It remains too early to say whether August’s upturn is a dead cat bounce or the start of a sustained post-shock recovery,” IHS Markit economist Chris Williamson said.

“But there’s plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate.”

Overall the figures suggested “an imminent recession will be avoided”, Williamson added. — Reuters