Wednesday, September 04 11:38:34
A rush of new business last month drove Britain's services sector to its fastest growth rate for more than six years, challenging the Bank of England's cautious outlook for the economy a day before a monetary policy meeting.
Today's Markit/CIPS UK services purchasing managers' index (PMI) rose to 60.5 in August from 60.2 in July, adding to a run of data suggesting the UK economic recovery is gathering momentum.
The reading was the highest since December 2006, holding well above the 50 threshold dividing growth from contraction for the eighth consecutive month. Economists polled by Reuters had predicted growth would slow slightly to 59.0.
Instead, order books at companies ranging from banks to restaurants filled at the fastest pace since May 1997, the month Tony Blair became prime minister.
Like the previous month, the PMI showed British businesses were at the forefront of Europe's nascent economic recovery, outpacing major euro zone peers that are still grappling for momentum.
It suggested Britain's economy is on course to better the 0.7 percent quarterly growth it experienced from April through June in this quarter, and comfortably so.
"I wouldn't be surprised to see growth double what the Bank of England is expecting for (this) quarter, because they're currently forecasting 0.6 percent," said George Buckley, chief UK economist at Deutsche Bank.
Sterling rose to a 7-1/2 month peak against a trade-weighted basket of currencies and a three-and-a-half month high versus the euro after the data.
The composite PMI, which incorporates manufacturing and construction data from earlier in the week, rose to 60.7 from 59.5, its highest level since the series began in 1998.
While that is welcome news for Britain's government after roughly three years of stagnation, the data may give Bank of England Governor Mark Carney pause for thought.
He has stressed the economy needs a lot more help from the central bank to nurse it back to health, and the bank does not plan to raise interest rates until unemployment falls to 7 percent, something he forecasts is at least three years away.
Some investors and analysts are not convinced he will be able to keep rates low for that long. (Reuters)