Cheers: The UK's services sector grew surprisingly fast last month

Emma Haslett
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The UK's services sector grew faster than expected in February (Source: Getty)

Economic growth in the UK might be stronger than thought, after a closely-watched index suggested the services sector is now the fastest growing part of the economy.

IHS Markit's purchasing managers index (PMI) for the UK's largest sector rose to 54.5 points, against expectations of 53.3 points, and well up on last month's 53 points. Anything above 50 denotes growth in the sector.

The news follows rather weaker performances from both the construction and manufacturing sectors, according to data released last week. In fact, the services sector was growing faster than manufacturing for only the second time since the Brexit referendum.

IHS Markit suggested the rise was down to stronger job creation across the service economy, while new business rose to its highest since May 2017.

Read more: UK economic growth revised down at end of 2017

“With the construction sector also pulling out of the stagnation seen in January, the economy as a whole picked up some momentum again in February, despite the slowing in manufacturing," said Chris Williamson, chief business economist at IHS Markit.

"The PMI surveys so far collectively point to the economy growing by nearly 0.4 per cent in the first quarter to indicate that a resiliently steady pace of expansion has been maintained."

“Today’s data suggests that business-to-business sales grew in February, helped by the improving global economic backdrop," added Justin Zatouroff, head of business services sector at KPMG.

"However, stretched household budgets continue to hold back domestic consumer demand. Anecdotally, the sector’s ability to increase operational capacity was limited by a tightening labour market plus the ongoing challenge of finding skilled workers. This trend needs to be watched closely as reduced inward migration may result in an even starker lack of work-ready talent post-Brexit."

The pound remained flat on the news, edging up 0.3 per cent against the dollar to $1.3838 in late afternoon trading.

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