• UK services sector activity grew strongly in September
• However, there was a downturn in hospitality
• September was the seventh consecutive month of job losses in the private sector
• Growth slows in the Eurozone
Laith Khalaf, financial analyst at investment platform AJ Bell comments on the latest IHS Markit/ CIPS UK Services PMI reading:
“It’s so far, so V for the UK economy, with another strong showing from the UK services sector in September showing that recovery is continuing apace. However, within that broad picture there are winners and losers, most notably the hospitality sector experienced a drop in activity as the boon of Eat Out to Help Out disappeared, and new social restrictions were imposed.
“The good news is further tempered by continued job losses and the fact that many consumer-facing businesses experienced a slowdown. Furthermore the reading doesn’t include the retail sector, which is clearly heavily exposed to the COVID crisis.
“While transactions in the property market look to have bolstered economic activity, it remains to be seen whether we’re simply seeing a blip caused by pent-up demand and the stamp duty holiday, or something more significant which reflects renewed and sustainable consumer optimism.
“Clearly tests for the UK economy still lie ahead, with government support being gradually withdrawn and the dark cloud of a second wave of COVID threatening to flood the country with more restrictions this winter.
“Things are also looking delicately poised over on the continent, where overall growth slowed in September according to the latest Eurozone PMIs. Take out Germany’s performance and things look more fragile, with both Spain and Ireland registering a sizeable downturn in activity.
“We’re still very much in wait and see territory when it comes to the long-lasting effects of the COVID crisis on the UK economy, not least because the virus itself is once again on the up. However, indications are that the third quarter economic growth lived up to hopes and expectations.
“The fourth quarter looks more challenging as the government weans the private sector off state support, and renewed social restrictions threaten to dampen consumer activity.”
