May 4, 2017 / 9:10 AM / 3 months ago

UK services sector surprises with growth pick-up in April - PMI

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Clearance sale signs and a To Let board are seen outside a clothing in Manchester, northern England October 7, 2008.Phil Noble/Files

LONDON (Reuters) - Britain's economy appears to have picked up some steam after slowing in early 2017, a survey showed on Thursday, welcome news for Prime Minister Theresa May who has called a national election in just over a month's time.

The Markit/CIPS Services Purchasing Managers' Index (PMI), a closely watched gauge of Britain's giant services industry, unexpectedly rose to a four-month high of 55.8 in April, above all the forecasts in a Reuters poll of economists.

The reading was the second strongest since mid-2015, a good backdrop for May and her Conservative Party to press their claims to be the best option for voters in the June 8 election.

But the survey included some warning signs for the economy, which has so far coped with the shock of last June's Brexit vote much better than expected by the Bank of England and private economists before the referendum.

Prices charged by service firms rose at the fastest pace since July 2008 and company executives reined in their optimism about the year ahead for a third month in a row.

Taken with PMIs for manufacturing and construction published this week, the April survey suggested the economy was growing at a quarterly pace of 0.6 percent at the start of the second quarter, Markit said, double the pace of the first quarter.

IHS Markit economist Chris Williamson said that kind of momentum was unlikely to last as households feel the pinch from rising inflation.

"While we expect consumer spending to slacken in coming months, with the April survey highlighting continued weakness in sectors such as hotels, restaurants and other household-facing businesses, there's good reason to believe that at least 0.4 percent GDP growth can be achieved in the second quarter as a whole," Williamson said.

The Bank of England's top policymakers will also pay close attention to the PMI surveys as they prepare for next week's monetary policy announcement.

The BoE is widely expected to keep interest rates at their record low throughout this year and possibly until 2019 as it steers the British economy through the uncertainty linked to the exit from the European Union.

One rate-setter voted last month for a rate increase, however, and others said they might follow suit soon if there were signs that economy was maintaining its momentum of 2016.

Reporting by William Schomberg; Editing by Catherine Evans

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