Activity in the UK’s services sector grew at its fastest pace since January, according to the latest survey of purchasing managers in the industry.
The purchasing managers’ index was 54.5 in October, beating analysts’ expectations of 52.4 — anything above 50 indicates expansion. The September result was 52.6. The latest survey also found the biggest ever one month rise in input prices.
It is the third consecutive month of expansion following a sharp decline in July after the EU referendum, and the latest in a series of better than expected economic indicators following the Brexit vote. Surveys of manufacturing and construction activity in October found that expansion had also continued in these sectors.
Last week, the Office for National Statistics estimated that economic growth in the third quarter was 0.5 per cent, above what the Treasury had expected.
However, input price inflation rose to its highest level since March 2011, the October services PMI found, because of the fall in the value of the pound.
“An encouraging picture of the economy gaining further growth momentum in October is marred by news that inflationary pressures are rising rapidly,” said Chris Williamson, IHS chief business economist.
“What’s especially reassuring is that growth is . . . becoming more balanced. Manufacturing is leading the expansion as exporters benefit from the weaker pound, but services growth is also reviving and construction is being boosted by renewed house building.”
Services make up the bulk of the UK economy, accounting for 80 per cent of gross domestic product. The sector is expected to suffer more than others if Britain leaves the European single market because of the benefits of common rules across the bloc.
The Bank of England is due to present its latest quarterly inflation report today and is expected to revise up its forecast for both growth and inflation.
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