Britain’s services sector, which includes hotels and Banks, grew faster than last month’s forecast, making the economy the strongest quarter of 2017, despite the worrying challenges facing brexit.
Living standards in memory have been squeezed by the biggest squeeze to spur growth in services activity in December, while optimism is at a seven-month high. Still, there are worrisome signs in the coming months as companies report the slowest growth since August 2016.
In the main reading month Markit/CIPS UK services PMI economists were confounding expectations of a slowdown from 53.8 per cent in early December. Economists had forecast a rise of more than 50.
Apart from the small solid reading manufacturing and construction industries, from Britain’s leading service report suggests in the last three months of 2017, between 0.4 and 0.5% of economic growth, according to IHS month Chris Williamson, chief economist at Markit. It will be the strongest quarter for the UK economy last year.
Services include transport, communications, finance, business and personal services, computing and IT, hotels and restaurants.
Economists had expected the UK economy to grow by about 1.5 per cent in 2017, 0.3 percentage points lower than in 2016, as the cost of household living squeezed consumer spending. The growth rate is expected to be close to 1 per cent in 2018 as negotiations to leave the eu intensify.
City bank its senior British economist carle, Pickering (Kallum Pickering) said that if there is no vote in 2016 decided to leave the European Union, the economy may be growing at around 2.5% last year. “The uncertainty of brexit prevents the UK from fully enjoying the tailwind of global synchronous economic growth,” he added.
Although the PMI figures give a broad range of positive reading for the health of the economy at the end of 2017, there are signs of weakness. In addition to the lowest level since August 2016, service companies say the uncertainty associated with brexit has hampered the willingness of customers to spend money. Employment growth also fell to a nine-month low.
Companies are paying more for food, fuel and higher wages as businesses try to keep workers’ pay at historically low levels. To balance books, companies have increased the price they charge customers, which could exacerbate the squeeze on disposable income.
The signals will encourage the bank of England, which is looking for signs of wage growth, to raise rates again this year. For the first time in a decade in November, Threadneedle Street raised its borrowing costs from 0.25% to 0.5%. It says it will need to raise interest rates further to curb inflation.