UK economy to accelerate after robust services sector activity

The UK economy is set to accelerate in the fourth quarter of 2017 after output in the powerhouse services sector chalked up a better-than-expected performance last month.

The IHS Markit/CIPS services purchasing managers' index (PMI) showed a reading of 54.2 in December, up from 53.8 in November, with economists pencilling in a figure of 54.

A reading above 50 indicates growth.

Chris Williamson, IHS Markit's chief business economist, said the robust result could help the UK economy achieve 0.5% growth in the final three months of last year, up from 0.4% in the third quarter.

Services industry activity recorded its second-fastest rise since April in December, but new business volumes slowed in the face of "subdued business investment and costs consciousness among clients".

The update follows a mixed performance from other areas of the economy last month, with the UK manufacturing industry churning out "solid growth" and construction output unexpectedly falling.

Mr Williamson said: "December saw a welcome upturn in service sector activity, highlighting the continued resilience of the economy as 2017 came to an end.

"Alongside the solid expansion seen in manufacturing and modest construction sector upturn, the survey data are consistent with the economy having grown 0.4% to 0.5% in the fourth quarter of 2017.

"However, as has been increasingly the case in recent months, the good news comes with a health warning about the sustainability of the upturn.

"Digging into the details behind the resilient strength signalled by the headline numbers, the survey data reveal an economy that is beset with uncertainty about the outlook, which is in turn dampening business spending and investment."

Sterling was up 0.2% against the US dollar at 1.354 following the announcement, with the pound drifting marginally lower versus the euro at 1.124.