Services sector perfect tonic for continued economic growth

Growth in the Services sector is usually a positive sign for the UK economy as a whole

The UK economy is set to grow faster than even the most optimistic forecasts would suggest, following on from impressive growth in the Services sector, it was revealed today.

The sector, accounting for almost 80% of the UK economy, saw growth at the fastest pace since 2006. The closely-watched Purchasing Managers’ Index headline figure jumped to 60.2 in July, up from 56.9 in June. Anything above 50 indicates growth.

With the sector accounting for such a large proportion of the economy, overall growth in the third quarter is likely to be higher than expected economists said, despite there still being two months of the quarter left.

Paul Smith, senior economist from Markit, said of the data: “The forward-looking elements from the survey point to a further strengthening of GDP in Q3 as the UK heads towards "escape velocity" and self-sustaining economic expansion”.

The sector has now seen growth according to PMI figures for the last seven months and follows on from gains seen in other crucial sectors, including manufacturing and construction.

GDP growth could shoot up to 0.7% or higher in the third quarter if new forecasts ring true.

Manufacturing forecasts for growth also were revised upwards, although there was a warning that there was a great need to boost investment in the sector to ensure it remains competitive.

The news will prove very welcome to the government, as it was just a few months ago that another recession was on the cards as growth had stalled.