Chances of a UK recession in second half of 2016 have 'all but evaporated'

Service sector growth in the UK registered a marginal slowdown, but remained in overall growth, according to the latest data published on Wednesday (5 October), as the economy continues to defy the odds.

The Markit/CIPS Purchasing Managers' Index (PMI) for the dominant services sector slowed slightly to 52.6 in September from 52.9 in August, when it staged the biggest one-month gain since the current data series was commissioned 20 years. A reading of above 50 indicates growth.

Markit said the overall performance of the economy appeared to be the strongest since January, and reduced the need for further stimulus by the Bank of England.

Chris Williamson, chief business economist at IHS Markit, said: "The solid PMI readings for September will cast doubt on the need for any further stimulus from the Bank of England in coming months.

"The economy remains vulnerable to further setbacks and the need for policy action later in the year cannot be ruled out," he added.

Williamson also said the chances of a UK recession in the second half of 2016 had "all but evaporated." On Tuesday, the International Monetary Fund admitted the UK economy will grow in 2016, having previously issued dire pre-Brexit warnings.

Elsewhere in its data release, Markit said the drop in the value of pound against major currency crosses had supported economic growth, but attached a caveat that a weaker pound was also pushing up prices being charged by service sector firms.