Britain's services sector rebounded strongly in August, as it recovered from the post-Brexit slump recorded in the previous month, a survey released on Monday (5 September) by IHS Markit Economics showed. Markit's Purchasing Managers Index (PMI) for the services sector rose from a four-year low of 47.4 in July to 52.9 in August, comfortably beating expectations for a 50 reading.
The 5.5 point increase month-on-month was the was the largest on record over the 20-year history of the survey and followed a record drop of 4.9 points in July.
Following the release, the pound rose 0.27% against the dollar to $1.3330, while it gained 0.21% exchanging hands at €1.1941.
The rate of expansion in the latest period was the fastest since May, but weaker than the long-run survey average, Markit added.
Following a drastic decline generated by uncertainty following the Brexit vote, the UK services sector expanded again as total activity increased and new work rose at the fastest pace in four months, after falling at the strongest rate since March 2009 in July.
The weakening pound boosted exports, while higher domestic tourism, increased demand from new clients and renewed confidence in Britain's economy all contributed to help the sector overcome the Brexit-induced jitters it experienced in July.
Firms linked positive output expectations over the next 12 months to export opportunities, reduced uncertainty, stable markets, product launches, expansion plans and a recovery in the energy sector.
The survey found new business growth was weaker than the long run survey trend, but sufficiently strong to generate a rise in outstanding work at service providers for the first time in five months, while job creation resumed, although the rate of workforce growth was weak.
Markit's chief economist Chris Williamson said the record rise in the services PMI added to the encouraging news seen in the manufacturing and construction sectors in August to suggest that an imminent recession will be avoided.
However, he warned that it was still too soon to determine whether the upbeat trend will continue in the long-term future.
"It remains too early to say whether August's upturn is a dead cat bounce or the start of a sustained post-shock recovery, but there's plenty of anecdotal evidence to indicate that the initial shock of the June vote has begun to dissipate," he added.
"Many companies are seeing business return to normal either simply by customer confidence rising or a stoic determination to 'Buck Brexit' and carry on regardless."