In various different forms, be it from Chancellors past and present, CBI executives, Mark Carney and the Bank of England, or other groups or analysts he message had been similar. Economic growth and recovery is happening, but it is slow, and tentative. Act carefully, and be prepared for more austerity whilst the economic recovery really gets into motion; however, the worst is over. Recovery is happening, but painfully and gradually.
There have also been other additions to such familiar statements. Firstly, the housing market is “overheating”, or there is a “housing bubble”. Banking scandals have followed each other with monotonous regularity, resulting in the Financial Conduct Authority under Martin Wheatley reining in financial institutions like a sheriff in the old Wild West.
The other fact noted (with what many sense is a degree of surprise and awe amidst economic and government circles) is the startling success of the services sector.
Encompassing hotels, restaurants hairdressers, beautician and similar, the sector has seen an unprecedented time of growth over the last 21 months. Whereas construction and manufacturing have seen tough times, the PMI of the UK services sector has continually been hovering in the 50’s or 60’s. August, for example, saw the PMI at 60.1, an increase from 59.1 in July. The Purchasing Managers Index (PMI) is a monthly survey of private companies in specific financial areas. The resulting assessment is used as a guide towards economic strength and purchasing power, with a PMI in excess of 50 indicating growth in that sector.
September, however, surprisingly saw a dip in the services sector. The PMI fell to 58.7. Although a small slip economically, it had economists surprised (yet again) - but overall not concerned. Given the strength, both past and present, of the sector that encompasses nearly three quarters of the UK economy currently, many economists are certain that it is a momentary dip in the sector, with all comers predicting the PMI and other indicators to still reflect growth. With the busiest season of all coming up with the inevitability of rain in August, the industry itself knows that output, employee hours, food and drink bought and consumed, hotel rooms booked, and Christmas parties organised, are all about to show an steady but ruthless climb. That is by far a better indicator for the industry than the economist’s revered PMI.
A side effect of the strength of the services sector has been employment. Unlike other sectors, hospitality still enjoys very low unemployment, and indeed has been responsible for a great deal of job creation. Indeed, with more job seekers the last few years, and resurgence in the British culinary scene, along with increasingly ambitious hotels and resorts, the employment prospects in the sector have never been brighter. Retention, turnover and progression still remain endemic issues in the industry, however; but that is a matter for a post all of its own.
Indeed, that healthy employment figure has, in turn contributed to data that shows that UK employment overall has shown a decline. That last point, however, remains heatedly debated by several concerned parties. Despite being pleased with such results from the services sector, the Bank of England is still waiting, and hoping, for the employment prospects opening up, and the slow but steady recovery, to translate into an increase in real wages.
That last remains to be seen, and will probably not happen for a very long time. What is not disputed is that the UK services sector remains very strong economically, and will no doubt continue to lead and contribute greatly to the national economic growth.
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