UK services PMI highest since Aug 2007 -CIPS

LONDON, Nov 4 - Britain's service sector showed its strongest activity since the start of the credit crunch in October, helped by growth in new orders to a two-year high, a purchasing managers survey showed on Wednesday.

The headline PMI index from the Chartered Institute of Purchasing and Supply/Markit survey rose to 56.9 from 55.3, its highest since August 2007 and the sixth successive month above the 50-level that separates growth from contraction.

"Growth of the UK service sector gathered momentum in October ... with the headline index, which covers around 40 percent of the UK economy, currently consistent with quarterly growth in excess of 1 percent at the start of Q4," said Paul Smith, senior economist at Markit.

However, the PMI data -- which many economists treat as the best monthly proxy for UK services growth -- have not matched the outturn of recent official data.

British GDP unexpectedly shrank 0.4 percent in the third quarter after a contraction in services output that surprised economists given the PMI survey had reported activity growth throughout the period.

New business rose for a fourth month in a row in October, and at the fastest pace since September 2007, the PMI survey reported.

"Growth of new orders in October was linked to generally higher market demand. Previously delayed expenditure was now being released by clients, in line with growing market confidence," the report said, adding that financial services had done particularly well.

Nonetheless firms continued to shed jobs, albeit at the slowest pace since September 2008. The trend seems set to continue, with banks HSBC and RBS among the latest companies to announce thousands of job cuts in recent days.

Businesses said that price discounting had played a smaller role in supporting sales than in previous months, and some firms said that higher input costs had caused them to raise prices.

Input price inflation was the strongest in 11 months, albeit still low by historic standards, with companies citing upward pressure from fuel and energy bills, a rise in the minimum wage and pricier imports due to weaker sterling.