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Strong services sector data show British economic resilience

Xinhua, May 4, 2017 Adjust font size:

The purchasing managers' index (PMI) for British services sector in April reported strong growth on Thursday, rising 0.8 points to 55.8, a level at the top end of recent figures.

British service providers experienced a sustained rebound in business activity in April, supported by the fastest upturn in new work this year.

Job creation also rose to a four-month high, driven by renewed pressures on operating capacity. A strong pace of input cost inflation persisted, which contributed to the steepest rise in prices charged by service sector firms since July 2008.

Chris Williamson, chief business economist at IHS Markit said that the upturn in the services PMI rounds off good news this week after upside surprises to both the manufacturing and construction PMIs on Tuesday and Wednesday.

The three surveys collectively point to GDP growing at a rate of 0.6 percent at the start of the second quarter, which would be a considerable improvement on the preliminary official GDP estimate for the first quarter of 0.3 percent.

"While we expect consumer spending to slacken in coming months, with the April survey highlighting continued weakness in sectors such as hotels, restaurants and other household-facing businesses, there's good reason to believe that at least 0.4 percent GDP growth can be achieved in the second quarter," said Williamson.

A sharp rise in inflation driven by a steep fall in sterling on foreign exchange markets in the wake of the Brexit referendum vote in June last year has seen import prices rise along with commodities prices for manufacturers.

"The PMI surveys also show average prices charged for goods and services rising at the fastest rate since September 2008. Price hikes were widely attributed to the need to pass increased costs onto customers, in turn partly linked to the weak exchange rate making imports more expensive," said Williamson.

"The survey data therefore suggest that consumer price inflation has further to rise from its current 2.3 percent pace in coming months." Enditem