Service sector hits 8-month high in April, says Markit

Tuesday 7 May 2013

Business

The UK service sector continued to perform well during April, according to latest figures from Markit.

The organisation's headline Business Activity Index rose to 52.9 in April, improving on the 52.4 recorded in March.

This means the index has now posted above the 50.0 no-change mark in each month since the start of 2013. Growth has steadily strengthened this year, reaching an eight-month high in April.

Markit said the index was boosted by the strongest rise in new work since last May and a modest increase in staffing levels.

In terms of pricing, input costs rose at a marked pace, although the degree of inflation weakened. Output charges remained unchanged from March.

Sales rose at the sharpest rate for just under a year as market conditions strengthened - with new products, better weather and increased foreign demand all playing a part.

Backlogs of work rose for the first time since last September, helping to fuel a further rise in payroll numbers, Markit stated.

This means employment has now risen continuously since the start of the year within the services sector.

Some 46 per cent of service providers surveyed are now forecasting an increase in business activity over the next 12 months.

That said, the economic climate and competitive pressures were still found to be having an impact on levels of business confidence.

"A broad-based improvement is becoming evident in the UK economy, greatly reducing the likelihood of the Bank of England seeing any need to increase its asset purchases in the immediate future," said Chris Williamson, chief economist at Markit.

"The upturn is being led by the service sector, but it has been accompanied by signs of activity stabilising in manufacturing and construction in April."

He noted that the PMI data suggests that the return to growth enjoyed by the economy in the first quarter persisted and "may have gained momentum at the start of the second quarter".

“With the economy showing signs of gaining momentum and inflation running well ahead of target at 2.8 per cent, the latest PMI data kills off the likelihood of the Bank of England’s Monetary Policy Committee voting for more asset purchases at its May meeting," Mr Williamson predicted.

"The Bank instead looks set to watch the data flow over coming months and, in particular, to await further evidence of the impact of the newly-extended Funding for Lending Scheme."

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Posted by Sarah Parish