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UK services sector activity accelerated in August 2016

UK services sector activity accelerated to a record pace in August 2016, increasing evidence of economic recovery after the shock of the country’s decision to leave the European Union. The Purchase Managers’ Index (PMI) of Markit jumped to 52.9 points from a seven-year low of 47.4 points in July, which is the largest monthly increase ever. Returning to growth in the biggest part of the economy, probably will reinforce speculation that the Bank of England will refrain from introducing additional incentives this year. Markit predicted that UK will avoid immediate recession, but warned that the data after the Brexit referendum in June so far point to stagnation in the quarter, and many companies are looking anxiously to prospects.

“It is too early to say whether the rise in August was one shot or start a sustainable recovery”, said economists from Markit. “However, there are many amazing evidence suggesting that the initial shock of the vote in June has begun to dissipate”, adds Markit.

Studies of Markit during the last week showed that the manufacturing and construction sector also recovered in August, as industrial activity has grown with the fastest pace in 10 months. The overall index of the three industries reached 53.6 points in August from 47.6 points in July, which also surpassed estimates.

Although business expectations have largely recovered to the levels in July, they still remain weak by historical standards. Business confidence is still at one of the lowest levels in four years. Many companies continue to worry about the prospects and how the economy will cope in the event of Brexit. This suggests that political and economic uncertainty will likely prevail in the coming months, suppressing growth.

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