THE UK's dominant services sector grew in October at its fastest monthly pace since May 1997, and the increase in its workforce was the sharpest for more than 16 years, a key survey shows.
The survey, published yesterday by the Chartered Institute of Purchasing and Supply and financial information company Markit, raised hopes that the UK could achieve further significant growth in the fourth quarter. UK gross domestic product (GDP) rose by 0.7% in the second quarter, and by a further 0.8% in the three months to September. But UK GDP in the third quarter was 2.5% adrift of its peak in the first quarter of 2008, before the Great Recession.
CIPS's business activity index for services rose from 60.3 in September to 62.5 on a seasonally adjusted basis, moving further above the level of 50 calculated to separate expansion from contraction. The employment index climbed from 53.3 in September to 56.2 in October.
The services survey, which does not include retail, followed strong reports from CIPS this week on manufacturing and construction sector activity in October.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "This is a mightily impressive survey, indicating that the services sector started off the fourth quarter very much on the front foot after a strong third quarter."
He said the survey signalled a "very real possibility" growth in the fourth quarter could rival the 0.8% rate in the three months to September. But he expects 0.6% growth in the fourth quarter, believing consumer spending will moderate.
Martin Beck, at Capital Economics, said: "The CIPS business surveys suggest the UK economy got off to a very strong start in Q4.
"An improvement on Q3's 0.8% expansion would seem eminently possible."
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