Services sector boost ‘brings interest rate rise closer’Comments Off on Services sector boost ‘brings interest rate rise closer’
Services companies, which account for more than three-quarters of economic output, stepped up the pace in June after growth slipped to a five-month low in May.
The Chartered Institute of Procurement & Supply’s activity index, where a score over 50 indicates growth, accelerated from 56.5 to 58.5.
Survey compiler Markit said its latest data — also covering builders and manufacturers — signalled growth of 0.5% between April and June, faster than the first quarter.
“The post-election rebound in service sector business activity adds to the likelihood of the Bank of England starting to nudge rates higher later this year,” chief economist Chris Williamson said.
A hike this year would be earlier than the spring 2016 move pencilled in by financial markets.
The pace of job creation slowed, while firms also ate into outstanding workloads for the first time in more than two years.
Williamson added: “Policymakers will want to see further improvements in the data, including signs of a sustainable upturn in pay growth, before feeling comfortable that the UK economy is ready for higher interest rates.”