What's going on?

The relatively good data on the UK economy keeps rolling in. This time it concerns the biggest part of the economy: �services,� e.g. banks or restaurants. According to an influential survey, July to August saw the biggest jump in activity in the 20-year history of it being conducted.

What does this mean?

Services account for about 80% of the UK�s economy, so this data is a very important gauge of the overall economy. It�s worth noting that it�s a rebound from July and the absolute level is below the average of the past few years. Nevertheless, it�s much better than what many economists were predicting prior to the Brexit vote and a welcome relief for Brits after the initial (economic) shock.

Why should I care?

The bigger picture: It�s too early to celebrate.
The good news? Britain�s economy doesn�t seem to be falling apart. The �shock� of the vote seems to have been absorbed. But now the real work begins and the focus will likely be on the sort of deal that Britain will eventually negotiate with the European Union (as well as other future trading partners). Uncertainty remains high – and, therefore, so do the risks to the UK economy.


For markets: The value of the pound jumped to a seven-week high.
Monday�s news was the latest in a swathe of economic data showing an economic rebound in August. With each bit of good data, the pound has risen in value. This likely reflects investors� belief that, if the economy is performing better than expected, then Britain�s central bank won�t need to take as much action to get things going again. Central bank action (e.g. lowering interest rates) tends to be negative for one�s currency because if interest rates are lower, then international investors are likely to look elsewhere for higher returns (click here for a more detailed explanation). So, less action is probably positive for the pound.