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Service sector expands at fastest rate since May 1997
THE UK service service sector has expanded at its fastest pace for more than 16 years and is now the driving force behind the growing economy, a leading industry report has said.
Companies have created new jobs and are now facing a backlog of work, according to the latest Markit/CIPS UK Services Purchasing Managers' Index.
The report says the service sector index increased to 62.5 in October, an improvement on September's 60.3, with any figure above 50 signalling growth.
The results means activity in the sector has grown at its strongest since May 1997, which the report says has been helped by increasing business won by service providers and improved economic confidence.
Bosses also said new work in October had risen at its sharpest rate since July 1996, causing increases in backlogs of work for the seventh successive month, with employment rising for the tenth consecutive month and higher than average wages.
However, rising energy, fuel, and utility bills drove up input cost inflation to its highest in eight months.
Chris Williamson, Markit chief economist, said: “The UK economic recovery moved up a gear again in October, with the PMIs indicating record growth of output and employment.
“The all-sector PMI, measuring business activity across the UK private sector economy, hit an all-time high of 61.5 in October, up from 60.2 in September.
“Historical comparisons of the PMI against gross domestic product suggest latest data is consistent with a 1.3 per cent quarterly rate of GDP growth, up sharply from previous quarters.
“The surveys also indicate that the rate of private sector job creation is currently running in excess of 100,000 per quarter.
“Manufacturing, services and construction all continued to see very strong rates of expansion, pointing to an ongoing broad-based upturn.
“However, it is the services sector which, due to its sheer size, is the major driving force behind economic growth at the moment.”
David Noble, chief executive at the Chartered Institute of Purchasing and Supply, said the results pointed towards a strengthening economy.
He said: “Alongside manufacturing and construction, the services sector hit a record high in October, rounding off a sparkling start to quarter four for the UK economy.
“Confidence is high this run of growth can be maintained throughout the final quarter, underpinned by the stable economic climate and improvements in the housing market.”