Hopes have been raised that the economy is starting to grow again in this third quarter following data released by the CIPS/Markit Business Activity Index. This showed that the service sector reached a 17-month high. The index reached 53.2 which was a sharp rise from 51.6 in June. Industry experts had predicted a peak of only 51.8 for July.
Overall the index has risen 13 points since November when it reached its all time low. In the history of this index, this period shows the most marked improvement in the sector.
However, businesses still continued to reduce their staffing levels throughout July, both by non replacement of staff leavers and also through redundancies.
Equivalent data relating to manufacturing was released earlier in the week that also showed an increase during the month of July. This is the first sign of growth in this market since last March.
These figures could be taken as a sign that Britain is now coming out of recession, despite the 0.8% fall in the second quarter.
Chief executive of the Chartered Institute of Purchasing and Supply, David Noble, said: “The services sector is rebounding at an unprecedented rate after what has arguably been the most savage economic downturn since the end of World War II. After hitting an all time low in November, July saw the sector make marked gains with new business activity rising for the third month running and at the sharpest rate in almost a year and a half. Increasing levels of higher new business have helped.”
He continued, “Nonetheless, the scars inflicted on the sector by the troubled economy will take time to fade as companies are still cautious about committing to a substantial spending. We’re still seeing companies reduce their prices and the job landscape remains difficult with wage pressures blunted as overall staff levels continue to fall steeply. This is a pattern we’re likely to see continue until the end of the year and employment and employment will, from a longer term perspective, recover at a slower rate than business activity.”