BRITISH services are reporting the fastest growth this year so far, even as the country’s manufacturers report a slowdown, suggesting that the recent expansion may be unbalancing.
The August survey of the services sector conducted by the Chartered Institute of Purchasing & Supply (CIPS) and Markit came in at 60.5 – the strongest since November last year. Any score over 50 indicates an expansion.
By contrast, the manufacturing sector’s purchasing managers’ index (PMI) came in at 52.5 this month, signalling modest growth, at the slowest pace in more than a year.
“The UK’s recovery is lopsided again, but it has not lost pace, yet,” said Robert Wood of Capital Economics.
“The internationally exposed manufacturing sector has been affected by worries over the fighting in Ukraine and the associated slowing in core-Europe, but the UK domestic economy continues to roar ahead and more than make up the loss in momentum from relatively small manufacturing.”
Despite the strong reading, and though firms are still hiring, the increase in staffing that services recorded in August was the slowest in five months.
Large manufacturing companies previously reported that they had actually trimmed employment in August, suggesting that the UK’s rapid drop in unemployment may begin to slow down.
There was also little sign of any inflationary pressure building, with output prices rising at the slowest pace in more than a year.
“It seems now that even though there are broad-based indications in the UK and across Europe that the manufacturing sector is set to slow, contagion to the rest of the UK economy is not yet on the agenda,” said Barclays’ Fabrice Montagne.
“That said, this morning’s release does point to some moderation down the road as expectations cool down and hiring behaviour becomes more cautious.”