The growth forecast by the Organisation for Economic Cooperation and Development has been sharply increased for 2013 from an earlier estimate of 0.8% to a revised estimate of 1.5%.
The forecast came as a survey indicated that activity in the UK construction sector grew at its fastest pace for nearly six years in August, and earlier in the week a similar survey had shown strong growth in the manufacturing sector. Within days of the OECD uplifting its forecast a further survey of the service sector showed that it too was increasing at its fastest rate in six years.
Whilst the OECD’s latest assessment of global prospects showed that global growth was to remain sluggish as problems in emerging economies offset improving recoveries in some advanced economies it cited the UK, North America and Japan as places where activity was expanding at “encouraging rates”.
The latest Markit/CIPS purchasing managers’ index (PMI) for the UK’s construction industry indicated its highest reading since September 2007.
Markit senior economist, Tim Moore, was quoted as saying “The latest construction PMI figures are yet another indication that the UK economy has
“A steep upturn in civil engineering activity suggested that public sector demand has joined residential building as a key driver of construction output growth during August.”
On Monday, the PMI survey for the manufacturing sector found the strongest growth in activity for two and a half years, with output and new orders rising at their fastest rate for 19 years.
Subsequently the latest CIPS survey shows that in August 2013 the UK service sector grew at its fastest pace in six years, building on the growth momentum seen in July. It also showed that there was a slight increase in employment in the sector, and with backlogs of work running at the highest level in more than 13 years the pressure to take on more staff is growing.
August saw the eighth successive month that the survey, which questions 700 firms, has shown a growth in new business, and according to Paul Smith, senior economist at research firm Markit, “the sector’s recovery, which has been evident since the start of the year, has legs.”
Economists say the performance of the service sector is giving the whole economy a lift.
“Robust service sector activity played a key role in the UK’s developing recovery through the first half of the year, and the very strong purchasing managers survey for August suggests that the services sector is on course to make an even larger contribution to GDP growth in the third quarter,” according to Howard Archer an economist at IHS Global Insight.