New data on the the UK?s services industry ? which accounts for nearly 80% of the economy ? suggests that the country will avoid a recession this year.
The Markit/CIPS UK Services PMI (purchasing managers? index) shows that the service sector returned to growth in August following sharp falls in output and new business in July in the aftermath of the EU referendum.
In the latest survey, the seasonally adjusted Markit/CIPS UK Services Business Activity Index rose from 47.4 in July to 52.9 in August. A reading above 50 indicates growth, and below 50 contraction.
The month-on-month gain of 5.5 points was the largest ever recorded in the 20-year history of the survey and followed a record drop of 4.9 points in July.
Companies reported that uncertainty had abated somewhat. The renewed expansion of total activity was supported by a resumption in growth of new business in August. New work rose at the fastest pace in four months, having previously fallen at the strongest rate since March 2009 in July.
Survey compiler IHS Markit noted that new business growth last month was still weaker than the long-run survey trend, but was sufficiently strong to generate a rise in outstanding work at service providers for the first time in five months.
Chris Williamson, chief business economist at IHS Markit, commented:
?A record rise in the services PMI adds to the encouraging news seen in the manufacturing and construction sectors in August to suggest that an imminent recession will be avoided.
?The three PMI surveys point to a stagnation of the economy so far in the third quarter, meaning much hinges on the September data to see whether the economy contracts or ekes out modest growth.
?It remains too early to say whether August?s upturn is a dead cat bounce or the start of a sustained post-shock recovery, but there?s plenty of anecdo