The final batch of UK PMI survey data for 2016 showed the UK service sector expanded sharply in December, helping to make the three months period the strongest quarter of the year.
The index rose for the third consecutive month to 56.2, from 55.2 in November, the fastest expansion since July 2015.
Dean Turner, UK economist at UBS Wealth Management sees the data as a significant update for investors.
“Following an unexpectedly strong showing from the UK’s manufacturing and construction sectors earlier in the week, today’s figures demonstrate that the economy ended last year on a confident note, which bodes well for momentum heading into 2017,” he said.
“The robust nature of recent economic data has been supported by a number of factors, in particular the weaker pound, as well as looser monetary and fiscal policy,” Turner added. “As we move further into the year, our expectation is that these positive effects may begin to fade. Moreover, higher inflation is likely to erode household income growth which could dampen the up to now buoyant consumer.”
Chris Williamson, chief business economist at IHS Markit, said: “A buoyant service sector adds to signs that the UK economy continues to defy widely-held expectations of a Brexit-driven slowdown. The faster growth of services activity follows similar news of improvements in the manufacturing and construction sectors at the end of 2016. “Collectively, the PMI surveys point to the economy growing by 0.5% in the fourth quarter, with growth accelerating to a 17-month high at the year-end. “At face value, this improvement suggests that the next move by the Bank of England is more likely to be a rate hike than a cut, but policymakers are clearly concerned about the extent to which Brexitrelated uncertainty could slow growth this year.”
