UK services prop up economy on better than forecast growth

Bloomberg

UK services activity grew more than expected in February, supporting economic growth and keeping alive the prospect of an interest-rate increase within months.
IHS Markit’s Purchasing Managers Index for the biggest part of the economy jumped to 54.5— a four-month high—from 53 in January. That’s well above the 53.3 reading forecast by economists in a Bloomberg survey.
The report showed that new business picked up for a second month and the backlogs of business increased, which bodes well for the coming months.
While Markit’s manufacturing index for February declined, construction performed better, and it said the surveys show a “steady pace” of economic expansion is being maintained. It estimates growth of 0.4 percent this quarter, matching the rate of the final three months of 2017.
“With Bank of England policy makers sounding hawkish,” the PMI upturn “surely leaves a May rate hike very much in play,” said Chris Williamson, chief business economist at Markit. “The bank seems keen to normalise interest rates even if output growth is below levels it would usually like to see when tightening.”
BOE Governor Mark Carney has said that more interest-rate increases will be needed to keep inflation in check, though he’s refused to commit to any specific timing. Traders are pricing in a high chance of a hike in May, and some economists say there may even be two moves this year.