Activity in the sector - which includes restaurants, hotels, transport and business services and accounts for more than three-quarters of the economy - rose at its fastest pace in eight months, according to the
The headline index rose to 59.1 from 57.7 in July, and any reading above 50 indicates expansion. Economists were expecting a more modest increase to 57.9.
The figure offsets weakening growth indicated in the equivalent survey for manufacturing, suggesting that the third quarter got off to a reasonable start in July following growth of 0.8% in both the first and second quarters. Economists said there was no sign as yet of the slower growth predicted by the Bank for the second half of the year.
Economists said that the better than expected PMI increased the prospects that one or more members of the Bank's nine-strong monetary policy committee would vote for a rate rise when it makes its monthly policy decision tomorrow.
It would be the first time that a member has voted for a rise since
The MPC has made it clear in recent weeks that it will not raise interest rates until it sees a pickup in wage growth, which is still lagging behind inflation, despite economic recovery.
But services companies surveyed for the July PMI reported that their operating costs were being driven higher by increases in wages, reinforcing expectations that rates might rise sooner rather than later.
However, the majority of MPC members are expected to vote to leave rates unchanged, and any dissent will only be made public when the minutes of the meeting are published two weeks after the event.
Heightened expectations of a rate rise in
The all-sector PMI for July - combining the services, construction and manufacturing surveys - showed accelerating growth, with an increase to 59.1 from 58.4 in June.
"For example, July's GfK consumer confidence barometer dropped for the first time since December, while house price growth (on the Nationwide measure) slowed in the same month to the lowest rate since
Despite the increase in the headline index, employers across the three sectors combined created jobs at a slower rate in July than they did in June.
In the eurozone, a combination of
Overall, the eurozone's composite output index rose to a three-month high of 53.8 in July, from 52.8 in June, suggesting the single currency bloc's recovery accelerated at the start of the third quarter.
However, a breakdown by country showed a strong performance from
The index in
Williamson said that although the data overall was positive, the eurozone was still facing a lot of uncertainty.
"There is clearly growing anxiety about the economic impact of the crisis in
The eurozone economy grew by 0.4% in the first quarter, while unemployment remains elevated at 11.5%.
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