UK business output is returning to a growth path, with a stronger manufacturing performance enabling marginal overall expansion in spite of service sector contraction, a survey by BDO signals.
However, the services sector weakness points to “stuttering” UK growth later this year, the accountancy firm said.
BDO’s output index – which indicates how businesses expect their order books to develop over the next three months – rose to 95.1 last month from 94.9 in June. The accountancy firm noted that this took it back “above the point of contraction”, 95.0.
“The small increase indicates that output is rising once again, albeit at a very slow speed,” said BDO.
The accountancy firm’s manufacturing output Index increased to 98.6 in July from 97.6 in June, with BDO noting it was “rising closer to the long-term growth trend at 100”.
BDO said: “The recovery of the manufacturing sector is encouraging for the health of the economy.”
But it added: “As the sector only accounts for about one-tenth of all UK economic output, its resurgence has a marginal effect on the overall growth of the economy, reflected by the 0.2 [point] rise in the overall output Index.”
BDO’s services output index remained at 94.4 for the second month running, 0.6 points below the level identified as the point of contraction.
Referring to UK gross domestic product data published last month by the Office for National Statistics, BDO said: “The services sector grew 0.5 per cent in Q2 of 2017, but the services output index indicates that order books in the sector are set to shrink in the coming three months, which would leave the growth of the UK economy stuttering towards the end of 2017.”
The BDO survey signals optimism about future business activity among manufacturers in Scotland and the rest of the UK.
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