UK economic growth accelerating

IN: Industry news

The UK economy is enjoying its strongest spurt of economic growth for 15 years, according to the latest set of purchasing managers’ index (PMI) reports from the manufacturing, construction and services sectors.

undefinedMarkit, who produce the reports, said that its all-sector PMI which combines all three reached an all-time high in August, beating the record set in July.

It means the growth in the UK economy seen since the start of the year is set to continue and at a quicker pace.

The economy grew by 0.3 per cent in the first quarter and by 0.7 per cent in the second quarter. Markit said the data from July and August indicates that GDP is likely to grow by “at least 1.0% and possibly as much as 1.3%, assuming there is no waning of business conditions in September.”

Markit has produced the PMI reports for 15 years and in August the all-sector PMI went up to 60.7 from 59.5 in July after accelerated growth in all three areas of the economy.

On Monday 2nd September, the manufacturing sector PMI hit a two-and-a-half year high of 57.2 showing the biggest rise in new orders since 1994.

The good news continued on Tuesday, 3rd, September with the construction sector recording a PMI of 59.1, up from 57.0 and on Wednesday the services sector PMI reached 60.5, up from 60.2 in July to reach its highest level for almost seven years and post back-to-back PMI’s of above 60 for the first time since 1997.

A PMI of 50.0 or higher indicates expansion in the sector.

Chris Williamson, Chief Economist at Markit said the pace of economic growth had clearly taken the central bank policymakers by surprise in relation to last month’s announcement on forward guidance on interest rates and that “this exacerbates the challenge faced by the Bank of England in justifying ultra-loose policy for the time frame envisaged.”

Mr Williamson said that this means the Bank of England is likely to focus on the more negative aspects of the reports when it decides on its policy.

August saw employment growth fall sharply compared to July with firms indicating reluctance to take on new staff. However, Williamson expects this to “be only temporary given the strength of order book growth.”

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