UK services PMI rises to 8-month high

London - Activity in Britain's services industry increased last month at the fastest rate since November, helping overall private-sector activity to its briskest growth in three months, a survey showed on Tuesday.

The figures are likely to revive speculation over whether the Bank of England will raise interest rates before the end of the year, and contrast with other data pointing to a slight slowdown in British growth in the second half of the year.

The Markit/CIPS services purchasing managers' index (PMI) rose to an eight-month high of 59.1 in July from June's reading of 57.7, beating the average forecast of 57.9 in a Reuters poll of economists.

The related PMI for the manufacturing sector reported last week sank to a one-year low, but combined with robust construction data on Monday, the stronger services growth was enough to lift July's composite PMI to a three-month high.

"The domestic economy clearly continued to boom in July," said Chris Williamson, chief economist at Markit, which compiles the survey.

Britain's economy grew by 0.8% between March and June - well above its long-term quarterly trend of 0.5% to 0.6% - and Williamson said similar growth was possible for the July to September period.

Services growth was supported by new orders and investment, Markit said. The PMI survey covers private-sector services firms excluding retailers, and encompasses sectors which make up almost half of the economy.

However, service sector firms' confidence about the future was down slightly to 71.2 from 72.3, its lowest level in eight months though still high by historic standards.

Employment growth slowed slightly from June's record high but remained robust, while prices barely rose - something which may lessen pressure on the BoE to start raising rates from their record low of 0.5%.

"The sustained strength of growth will add to calls for interest rates to start rising later this year. However ... an absence of inflationary pressures means there is still a strong case for any tightening of policy to be delayed until 2015," Williamson said.

BoE Governor Mark Carney will present a quarterly update to the central bank's economic forecasts on August 13 and is also likely to give some guidance on how much room the economy has left to grow before inflation pressures prompt a rate rise.