Service sector growth accelerates, says PMI survey

Waiter at a restaurant in central London The service sector makes up the bulk of the UK's economic output

Activity in the UK service sector picked up in August, a closely-watched survey has suggested.

The PMI services index from Markit/CIPS rose to 53.7 in the month, up from 51 in July. Any number above 50 indicates growth.

The index hit the five-month high on the back of new contracts, increased marketing and, to a lesser extent, better weather, Markit said.

The Olympic Games had a mixed impact on activity in the sector, it added.

Some companies reported a positive impact, while others suggested the games had hit growth through travel restrictions.

The survey also found a "modest" rise in employment in the sector, as well as a rise in input costs.

Earlier, Markit's PMI construction survey showed the sector contracted in August, as new orders slumped at the fastest rate since the height of the 2008 financial crisis.

However, another Markit survey published on Monday showed an unexpected easing in the UK manufacturing downturn as a whole.

Together with the increase in service sector activity, Markit said the signs were that the UK economy would return to growth in the current quarter.

"Service sector companies reported a welcome rebound in activity in August, following disruptions due to the additional Jubilee bank holiday and unusually poor summer weather in previous months," said the group's chief economist, Chris Williamson.

"With the service-sector upturn accompanied by a marked easing in the manufacturing sector downturn, the survey data add to hopes that the economy will pull out of recession following the 0.5% contraction seen in the second quarter."

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