Services sector enjoys best performance for 17 months

Data also signals that inflationary pressures remained substantial
Data also signals that inflationary pressures remained substantial

Services sector activity jumped to a 17-month high in December as the British economy continues to exhibit signs of resilience in the face of Brexit uncertainty.

The closely watched Markit/CIPS services purchasing managers’ index (PMI) reached 56.2 in December, up from 55.2 in November and above economists’ forecasts of 54.7.

A reading above 50 indicates growth.

The PMI report said the sharp expansion in December rounded off the strongest quarter of the year, driven by new business.

Sentiment towards the outlook for the next 12 months also strengthened, despite ongoing uncertainty regarding Brexit and European elections, it added.

However, data also signalled that inflationary pressures in the sector remained substantial, with prices rising at the strongest rate since April 2011.

Chris Williamson, chief business economist at IHS Markit, said: “A buoyant service sector adds to signs that the UK economy continues to defy widely-held expectations of a Brexit-driven slowdown. The faster growth of services activity follows similar news of improvements in the manufacturing and construction sectors at the end of 2016.

“At face value, this improvement suggests that the next move by the Bank of England is more likely to be a rate hike than a cut, but policymakers are clearly concerned about the extent to which Brexit-related uncertainty could slow growth this year.”

Sterling rose on the news, with the pound climbing to 1.17 euro and 1.23 dollars.

The data follows strong readings from the manufacturing and construction sectors earlier this week.