UK services post fast growth
By Fiona Shaikh |
November 4, 2010, Thursday
|
Print Edition
Print Edition
GROWTH in British service sector activity unexpectedly quickened in October, a survey showed yesterday, reinforcing the view the Bank of England will opt against pumping any more stimulus into the economy for now. The headline business activity index in the Markit/CIPS PMI index rose to 53.2 last month from 52.8 in September, the highest reading since June and confounding forecasts for a dip to 52.5.
The figures were the latest in a run of unexpectedly firm economic data that analysts said indicated the recovery was on a relatively firm footing, and dented already waning market speculation that the BoE might expand its quantitative easing programme as early as this week.
Gilt prices fell and the pound rose to a 9-month high against the dollar as investors scaled back their bets on the chance of any monetary easing from the BoE when its two-day meeting concludes today.
"It reaffirms what we already knew: there's absolutely no need for the BoE at this stage to engage in any further quantitative easing and they're very much on hold for the foreseeable future," said Peter Dixon, economist at Commerzbank.
The services PMI data came after an unexpectedly robust survey of manufacturing activity and weaker construction and jobs PMI data this week, but on balance suggest Britain's economy made a solid start to the final quarter of this year.
Markit said its composite PMI index rose to 53.6 in October from 53.2, below its pre-recession average, but nonetheless indicating that the risk of a double-dip recession had receded.
And BoE policymakers are also likely to be concerned by news of growing inflation pressures in the services sector, with firms ramping up their prices at the fastest pace in two years in response to increases in energy and wage costs.
However, there is a risk of a slowdown further down the line, as the survey showed companies cut jobs and expectations for the year ahead fell back towards their June low on worries about the impact of government spending cuts.
The improvement in October's survey was led by a rise in new business, but the expectations index fell.
The figures were the latest in a run of unexpectedly firm economic data that analysts said indicated the recovery was on a relatively firm footing, and dented already waning market speculation that the BoE might expand its quantitative easing programme as early as this week.
Gilt prices fell and the pound rose to a 9-month high against the dollar as investors scaled back their bets on the chance of any monetary easing from the BoE when its two-day meeting concludes today.
"It reaffirms what we already knew: there's absolutely no need for the BoE at this stage to engage in any further quantitative easing and they're very much on hold for the foreseeable future," said Peter Dixon, economist at Commerzbank.
The services PMI data came after an unexpectedly robust survey of manufacturing activity and weaker construction and jobs PMI data this week, but on balance suggest Britain's economy made a solid start to the final quarter of this year.
Markit said its composite PMI index rose to 53.6 in October from 53.2, below its pre-recession average, but nonetheless indicating that the risk of a double-dip recession had receded.
And BoE policymakers are also likely to be concerned by news of growing inflation pressures in the services sector, with firms ramping up their prices at the fastest pace in two years in response to increases in energy and wage costs.
However, there is a risk of a slowdown further down the line, as the survey showed companies cut jobs and expectations for the year ahead fell back towards their June low on worries about the impact of government spending cuts.
The improvement in October's survey was led by a rise in new business, but the expectations index fell.
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