The UK has seen continued growth during the month of November despite concerns that an increase in prices could cause a slump in sales. The monthly growth follows a ten-month increase in the service sector. However, it is expected that growth will start to slow next year.
The IHS Markit/CIPS purchasing managers’ index (PMI) found that the service industry grew from 54.5 in October to 55.2 in November. It is compiled from monthly economic surveys. Despite warnings that growth is likely to slow down, it was much higher than any expectations. Any score above 50 suggests that industry is growing. The service sector includes hotels, restaurants and travel and leisure.
The growth is the highest for 10 months; it is now at its strongest since January. The index remained above 50.0 for the fourth consecutive month following the down turn after Brexit. It suggests that the industry sector is recovering following the referendum.
Chris Williamson, chief business economist for IHS Markit, said that the UK economy “remains resiliently robust in the fourth quarter, despite ongoing uncertainty caused by Brexit.”
It appears that the industry has put Brexit concerns on the back burner and have turned their attention to ensuring that the country is in the best position possible when approaching talks with the EU.
However, the report comes with a warning that the growth may not last into 2017 when prices are set to rise. The service sector accounts for 80% of the UK’s economy and therefore it is crucial that the service sector industry is thriving.
James Knightley, ING Bank’s senior UK economist warned that we could see “slower growth through next year” and that rising inflation will “squeeze household spending power and result in weaker consumer spending growth.”
The index follows last week’s figures by the Office of National Statistics (OFS) that show that Britain’s economic growth was 0.5% in the third quarter. The service sector growth stood at 0.8%. Currently the UK has avoided a major Brexit slow-down.
By: Charlotte Gannon
Sub-editor: Isabella Laws