U.K. Services Growth Accelerates to Fastest Pace Since 2006
U.K. services growth unexpectedly accelerated last month to the fastest pace since 2006 as companies reported a surge in demand.
A gauge of activity increased to 60.5 from 60.2 in July, Markit Economics and the Chartered Institute of Purchasing and Supply said in a statement today in London. Economists forecast 59.7, according to the median of 26 estimates in a Bloomberg News survey. Readings above 50 indicate expansion. A gauge of new business rose to the highest in more than 16 years.
The U.K. economic recovery that started in the second quarter is gaining momentum, with Markit’s reports on manufacturing and construction (ECO2PMIC) also showing faster expansion in August. Bank of England policy makers meet this week after pledging last month to hold the key interest rate at a record low until unemployment drops.
“The U.K. is well on course to register a strengthening of gross domestic product growth over the third quarter,” said Paul Smith, senior economist at Markit in London. The services industry’s recovery, “which has been evident since the start of the year, has legs.”
The pound extended its gain against the dollar after the report and was up 0.2 percent at $1.5592 as of 9:36 a.m. London time. The yield on the 10-year gilt slipped 1 basis point to 2.87 percent.
Construction grew at the fastest pace in six years in August, and an index of manufacturing expanded the most in 2 1/2 years, Markit said earlier this week.
In the euro area, a services index rose to 50.7 in August from 49.8 in July, Markit said. That’s below an Aug. 22 estimate of 51. A composite index of services and manufacturing increased to 51.5 from 50.5.
The nine-member Monetary Policy Committee will keep its bond-buying program at 375 billion pounds ($584 billion), according to all 38 economists in a Bloomberg News survey. Officials will also hold the key rate at a record low of 0.5 percent, a separate survey showed.
The meeting is the first for the MPC since it introduced forward guidance last month. Under the plan, policy makers said they won’t raise the benchmark rate at least until unemployment falls to 7 percent. The jobless rate was 7.8 percent in the second quarter.
The MPC will announce the decisions at noon in London tomorrow The meeting was moved forward a day to allow Carney to attend the Group of 20 summit on Sept. 5-6 in St. Petersburg, Russia. Minutes of the decision showing how officials voted will be published Sept. 18.
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