Spotlight: Survey data point to British economic growth inching upwards

Source: Xinhua| 2017-12-06 03:47:10|Editor: Yurou
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LONDON, Dec. 5 (Xinhua) -- Strong manufacturing sector and construction sector survey data have combined to bolster a slight falter in the services sector survey to show that British economic growth is likely to inch up a little over this quarter.

The purchasing managers' index (PMI) survey on Tuesday for the large services sector registered 53.8 in November, down from 55.6 in October, but still above the 50.0 growth line.

This is the 16th consecutive month of growth in the survey for the services sector, which represents 77 percent of the British economy.

PMI surveys for the manufacturing and construction sectors, released on Friday and Monday respectively, both showed strong growth, bolstering the services figures in the composite index.

"We did see the services survey weaken in November and we saw cost pressures intensify," Ruth Gregory, UK economist with Capital Economics a London-based financial data firm, told Xinhua on Tuesday afternoon.

She added: "But the sharp rise in the construction and manufacturing surveys meant that the economy-wide PMI which combines all three fell just a little, meaning that GDP growth at 0.4 percent or 0.5 percent per quarter -- this is a touch above the rate for the third quarter."

Growth next year has been downgraded by the official data watchdog the Office for Budget Responsibility (OBR) to 1.4 percent last month from a 1.8 percent expectation made in March.

Gregory said these figures pointed to a better outcome: "We still think the economy should hold onto its momentum into the fourth quarter, and produce growth of around 2 percent next year."

Service sector companies commented on rising business and consumer spending during November, but some noted that stretched budgets and Brexit- related uncertainty had continued to act as a brake on growth.

The latest reading signalled a solid increase in service sector business activity, but the rate of expansion was slightly slower than seen on average this year.

Reports from survey respondents attributed higher levels of business activity to a further solid upturn in new work.

The rate of new business growth also eased since October and was weaker than seen on average so far this year.


There were signs of pressure on operating capacity at service sector firms, as highlighted by a rise in backlogs of work for the third time in the past four months.

In some cases, survey respondents linked rising volumes of unfinished work to recruitment difficulties and a lack of suitably skilled staff.

The unemployment rate is lower than comparable advanced economies, at 4.3 percent which is a low not seen for over 40 years. At the same time, the number of jobs in the economy is at a record high.

Gregory said: "The survey suggests that services firms remain confident enough to take on new recruits at a solid pace. The balance is a still a little above its long-run average."

The central bank the Bank of England (BoE) and its Monetary Policy Committee (MPC) meet next week to consider a further rise in the bank rate from the 0.5 percent reached last month, which was the first rise in the rate since early 2009.

The MPC has indicated that over the next two years the rate is expected to rise gradually, but it is unlikely to be persuaded to make another move this year.

"While weakening in this survey makes it more likely that the BoE's MPC will hold off a rate rise at its meeting next week, we don't think they will hold off for too long," said Gregory.

"We expect interest rates to rise in the second quarter of next year."