The UK is now a post industrial nation with the vast majority of the heavy industry that once contributed to the nation’s wealth consigned to history. The driver of the UK economy is its service sector. According to a recent Markit Purchasing Manager’s Index (PMI) survey, the sector is enjoying its best rate of growth for ten months. The August PMI figure came in at 60.5, rising from a July level of 59.1. A PMI value above 50 indicates expansion in the sector being studied whilst a figure below this value shows contraction. Unsurprisingly, marketing activity growth is also strong as demand in the UK continues to hold up well for the moment. The figure contrasts with data for the manufacturing sector which is seeing its slowest level of growth for 14 months. However, with the economy of the Eurozone continuing to be anaemic (to say the least), business confidence in the UK has dipped to a 15-month low.
Given the relative importance of the service sector to the UK economy, things remain on track to see strong economic growth in the current quarter, comparable to the 0.8% figure seen in Q1 and Q2.
The situation for the service sector within the Eurozone is in contrast to that for the UK with Eurozone PMI surveys indicating that the economy was slowing. The overall PMI figure for the Eurozone slipped from 53.8 in July to 52.5 last month, indicating a slowdown is underway (but that the Eurozone economy is growing) with output down in Italy and France.
The most recent Markit data may increase pressure on the European Central Bank to attempt to stimulate the Eurozone economy at its next meeting (later today).