The UK services sector expanded at a faster pace in October than September, boosted by higher levels of new business, figures showed today.
But companies also cut jobs and were more subdued as they digested the comprehensive spending review, which included £81 billion of savings and 490,000 public sector job cuts, research group Markit and the Chartered Institute of Purchasing & Supply (CIPS) said.
Economists have said the figures are likely to raise expectations that the Bank of England will vote not to inject more stimulus into the economy tomorrow.
Markit and CIPS said the services Purchasing Managers Index (PMI) rose to 53.2 in October, its highest since June and up from 52.8 in September.
CIPS chief executive David Noble said: "On the face of it, with a four-month high, October's services PMI figure looks positive, but real and sustained growth remains subdued.
"The consequences of government spending cuts are not yet fully realised and business expectations remain historically low."
Mr Noble warned it was hard to see when and if the private sector would be able to support the recovery, in the face of public sector cuts.
He said: "Whilst the private sector has been set the task of picking up the pieces and making up the shortfall of job losses in the public sector, it's hard to tell at this point where the necessary demand and new contracts will come from to make this happen."
Policymakers at the Bank of England are holding their monthly meeting today, to consider whether or not to boost its quantitative easing programme or adjust interest rates from an historic low of 0.5%.
Howard Archer, chief economist at IHS Global Insight, said today's figures made any action unlikely at the end of the two-day meeting.
He said: "The October services sector survey fails to provide major ammunition to either the more hawkish or more dovish members of the Bank of England's Monetary Policy Committee.
"Consequently, we believe that the odds heavily favour the MPC keeping interest rates down at 0.50% at the end of their November meeting on Thursday and holding fire for now at least on further quantitative easing."Reuse content