Subdued services sector growth points to pace of economic activity stepping down relative to the early part of the year - EY ITEM Club comment

05 October 2016

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  • Services PMI dips in September…
  • …suggesting subdued growth in the sector
  • But Q3 as a whole still likely to achieve a decent rate of expansion 

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“The sizeable upside surprises of the manufacturing and construction surveys had created a degree of expectation that we would see a similar performance from the services sector.

“Services output is still likely to come in fairly strong in the preliminary estimate of Q3 GDP growth because of the strength of the July outturn. It seems plausible that growth in services output could match the 0.6% pace achieved in Q2, with GDP likely to have risen by around 0.3%.

“Nevertheless, it is clear that the pace of activity has stepped down relative to the early part of the year. Although stronger growth seen in the survey’s measure of new orders is positive, it still remains well short of historical norms. This provides further confirmation that while fears of a Brexit-induced recession were overplayed, we may well see a period of softer growth.”