- Services PMI at 54.3
- Second highest level since February
- Business confidence drops to 5 month low
UK service providers experienced stronger business activity and incoming new work during August, according to the latest IHS Markit Services PMI data.
The seasonally adjusted UK Services PMI Business Activity Index for August reached its second highest level since February at 54.3, up from 53.5 in July.
The headline index has posted above the 50.0 mark each month since August 2016, with the latest reading being slightly above the average of 54.0 over this period.
Economy on course to expand 0.4% in third quarter
According to Chris Williamson, Chief Business Economist at IHS Markit, the economy is on course to expand by 0.4% in the third quarter.
Following the release of the latest UK Services PMI figures, Chris Williamson said: “Faster service sector growth comes as much needed welcome news after disappointing manufacturing and construction PMI surveys in August.
“The survey data indicate that the economy is on course to expand by 0.4% in the third quarter, a relatively robust and resilient rate of expansion that will no doubt draw some sighs of relief at the Bank of England after the rate hike earlier in the month.”
Business optimism hits five-month low
Despite the positive PMI figures, business optimism towards the year-ahead hits its lowest level since March, largely attributed to the political uncertainty surrounding Brexit.
Survey respondents also reported a lack of suitably skilled candidates to fill vacancies often constraning business expansion plans.
UK Services PMI is often taken as an indicator of the strength of the UK economy due to the UK’s reliance on its services sector. A PMI of more than 50 shows the sector expanding, whilst a figure of less than 50 shows the sector has contracted.