The UK's dominant services sector performed slightly better than expected in April, fuelling hopes that the second quarter of 2017 will not see a further slowdown of the overall economy.
According to the latest Purchasing Managers' Index survey snapshot of the sector by Markit/CIPS, activity strengthened to 55.8 from 55 in March, with any reading above 50 signalling growth.
The consensus of City analysts had been for a slowdown to 54.5 in the month.
Services holding up
According to the Office for National Statistics overall GDP growth in the first quarter of 2017 slowed down sharply to 0.3 per cent from 0.7 per cent in the previous quarter, as the negative impact of the post-Brexit vote currency fall hit home.
Chris Williamson, an economist at Markit, said that the decent services PMI for April, combined with the relatively robust surveys for manufacturing and construction released earlier this week, pointed to a strengthening of GDP growth in the second quarter.
"There’s good reason to believe that at least 0.4 per cent GDP growth can be achieved in the second quarter as a whole," he said.
However, some analysts said that one should not read too much into the surveys.
"The PMIs’ record of predicting GDP growth leaves much to be desired, and the services PMI does not include the retail sector, which is at the sharp end of the consumer slowdown," said Samuel Tombs of Pantheon.
Service growth is estimated by the ONS to have declined to 0.3 per cent in the first quarter of 2017, down from 0.8 per cent in the first quarter, with consumer-facing firms such as retailers and hotels particularly affected.
Services accounts for around 80 per cent of the economy, manufacturing 10 per cent and construction 6 per cent.
Separately, the Bank of England reported Thursday that the number of mortgage approvals for house purchases declined to 66,837 in March, down from 67,936 in February, and consistent with a slowdown in the UK housing market.
It was the lowest number of new mortgages since last October.
Housing market slows
The Bank also reported that the annual rate of consumer credit growth slowed in March to 10.2 per cent, down from 10.5 per cent in February.
Credit card balances growth dipped to 8.9 per cent from 9.3 per cent previously.
Consumer borrowing has helped to underpin the economy's expansion in the wake of last June's Brexit vote.Reuse content