PMI index offers positive services outlook
Fri, 06 Nov 2009
The services sector showed further signs of a strong recovery last month, with a leading indicator providing its most positive results since September 2007.
According to the Chartered Institute of Purchasing and Supply/Markit Purchasing Managers' Index (PMI) for UK services, growth in activity and new business reached its highest level in two years.
The headline index saw an above-average increase to 56.9 – comfortably higher than the neutral level of 50 which indicates growth.
Benjamin Williamson, economist at the Centre for Economics and Business Research, said he believed that, despite official estimates, the PMIs indicate the UK is on the way to recovery.
Explaining his confidence, he stated that the PMI traditionally has been and continues to be a good indicator of economic growth.
"A less good indicator of economic growth is actually the preliminary estimate [of gross domestic product]," Mr Williamson stated.
"The PMI does tend to reflect what's going on – it's got a good correlation with output data."
Earlier this week, the manufacturing PMI also read at above 50, as growth in output and new orders regained momentum.
The seasonally adjusted PMI posted a reading of 53.7 in October, up by 3.8 points on September's revised figure of 49.9 – the third largest rise on record.
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