U.K. Services Index Unexpectedly Increases in Sign of Economy's Resilience

A U.K. index of services growth unexpectedly rose in September as the economy showed signs of resilience before Prime Minister David Cameron implements the deepest spending cuts since World War II.

The gauge of services activity increased to 52.8 from 51.3 in August, Markit Economics and the Chartered Institute of Purchasing and Supply said in an e-mailed statement today in London. Economists forecast 51, according to the median of 28 predictions in a Bloomberg News survey.

Chancellor of the Exchequer George Osborne said yesterday he would stick to his deficit-reduction plans amid concern the spending cuts, which will be announced on Oct. 20, will strangle the recovery. The Bank of England will this week probably keep its asset-purchase plan unchanged at 200 billion pounds ($316 billion) as policy makers face calls to increase stimulus.

“Slight increases in activity and improvements in business confidence show the service sector is doing its best to cling on during a phase of extreme uncertainty,” David Noble, chief executive officer at CIPS, said in the statement. “Whilst some companies are expecting the U.K. economy to pick up in the next 12 months there are wide variations in sentiment.”

The pound rose more than 0.2 percent against the dollar after the report and traded at $1.5898 as of 9:39 a.m. in London. The yield on the benchmark two-year government bond was unchanged today at 0.618 percent.

“Some Reassurance"

The report ‘‘should, temporarily at least, ease fears about the risk of a double-dip in the economy,’’ Vicky Redwood, an economist at Capital Economics Ltd. in London and a former Bank of England official, said in a note. ‘‘Today’s survey at least provides some reassurance that the economy is not plunging head- first into a renewed contraction.’’

Ashmore Group Plc, a U.K. fund manager that focuses on emerging markets, said on Sept. 14 that fiscal full-year profit rose 39 percent, boosted by higher performance and management fees after a recovery in global financial markets. Whitbread Plc, the U.K.’s largest hotel and restaurant operator, said last month that first-half sales increased 14 percent as more businesses used Premier Inn budget hotels.

Noble still said that companies in the hotels and restaurants industry were the ‘‘least confident’’ because of their susceptibility to consumer spending.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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