Improving consumer confidence helped the UK's service sector achieve its fastest growth rate for two and a half years last month, key figures showed today.
According to a study by Charted Institute of Purchasing and Supply (CIPS), activity in the service sector grew for the fifth month in a row in August.
The closely watched business activity index rose to a seasonally adjusted figure of 57 last month, up from 56.6 in July, indicating the fastest growth in the service sector since January 2001.
The study follows separate CIPS figures showing strong growth in production in the embattled manufacturing sector yesterday and comes as the Bank of England prepares to announce its monthly decision on interest rates tomorrow.
The study showed the level of new business coming in rose for the fourth consecutive month - with orders growing at their fastest rate since February 2001.
Firms said clients were showing greater confidence, reflecting an upturn in global economic conditions. They also said successful marketing and promotional campaigns were paying off.
And with workloads increasing, service providers chose to take on more staff, leading to a small expansion in the service sector workforce after almost two years of contraction.
Given a reading of 50.4 - anything over 50 representing positive growth - the employment index indicated only marginal gains.
But some employers said they had taken on extra staff in anticipation of further strong gains in new business in the near future.
Nevertheless, with the cost of labour rising and suppliers also increasing their prices, margins in the sector were squeezed.
Companies responded by pushing up their own prices but, with competition still tight, increases were small. The index measuring average prices charged gave a reading of 51.2 - down from 52 in July.
PA