Today's PMI services figures are early indication of another quarter of above trend growth – EY ITEM Club

6 May 2014

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  • Survey shows services continue to charge ahead…
  • …underpinned by greater levels of confidence…
  • …encouraging investment and recruitment

Martin Beck, senior economic adviser to the EY ITEM Club, comments on today’s PMI services figures:

“The third set of PMI figures for April stands back to back with the other two surveys, portraying a picture of sustained strength in the UK economy. Stronger growth performance and reduced global risk seem to have underpinned a robust pickup in sentiment, which is giving firms the confidence to commit to contracts, investment and recruitment.

“Although skills shortages seem to be pushing up wage costs in some sectors, across the services sector as a whole costs seem to be well contained. This is likely to reflect the strong growth in the size of the workforce, with an expanding labour supply making it easier for firms to ramp up employment levels without causing wage inflation to spiral upwards.

“These falling cost pressures will help to ensure the continuation of a low inflation environment. While some key base effects will fade out of the inflation figures this month, pushing the headline rate a touch higher, we expect the core pressures within the economy to remain subdued. This will help to boost the real incomes of workers and underpin renewed vigour in the British consumer.

“The set of PMI figures provide an early indication that another quarter of above trend growth, falling unemployment and subdued inflation can be expected in Q2. We continue to expect GDP growth of 2.9% in 2014 as a whole.”