Services turnover figures for July support hopes that GDP will expand by about 1% in the third quarter, consistent with “monetarist” optimism about economic prospects.

The turnover figures are neglected by the market but are an important input to the calculation of services output, a July number for which will be released on Friday. The turnover survey omits the government, retail and financial sectors so covers about 55% of services output. A further complication is that the numbers are in value rather than volume terms and are not seasonally or working-day adjusted.

The chart compares quarterly changes in seasonally-adjusted output volume and turnover value*, with a third-quarter estimate of the latter included based on the July survey. The suggestion is that output in the relevant sectors is on course to post a bumper rise. On conservative assumptions about government, financial services and retail trade*, services growth could exceed 1% this quarter, following 0.6% in the second quarter.

Already-released industry and construction data indicate that the two sectors will contribute about 0.25 percentage points (pp) to third-quarter GDP expansion if July output levels are maintained. A 1% services rise would add a further 0.75 pp for a total GDP gain of about 1%.

*Seasonally adjusted in Datastream.
*Retail trade accounts for 7% of services output. Sales volume in July / August was 1.5% above its second-quarter level, suggesting a 0.1 percentage point contribution to services growth.