UK service industry rebounds after snowy January

Britain's service industries bounced back strongly last month after the disruption caused by January's wintry weather, suggesting that the UK economic recovery is gathering pace.

The dominant service sector expanded at its fastest pace in more than three years in February, data released this morning showed. This follows last week's news that the economy grew by a faster-than-expected 0.3% in the fourth quarter when it came out of its longest and deepest recession on record.

Vicky Redwood of Capital Economics said together with strong growth in manufacturing and construction last month, the services outturn points to overall economic growth of 1% in the first three months of 2010. "At the very least the survey will ease concerns that the economy may have fallen back into recession this quarter," she said.

The closely watched purchasing managers index (PMI), compiled by the Chartered Institute of Purchasing and Supply/Markit to measure service sector activity, jumped to 58.4 in February from 54.5 in January, when heavy snow brought large parts of the country to a standstill. This more than reversed January's drop and marked the highest outturn since the start of 2007.

"The latest data confirms that the underlying trend in the private service sector remains positive and is on course to deliver a quarterly expansion above 1% in the first quarter," said Paul Smith of Markit. "When combined with the positive manufacturing results, February's PMI surveys augur well for the economy to build on the momentum of exiting recession in the fourth quarter."

A sub-index measuring new business in services increased to 57.5 from 53.4, the highest since September 2007. Encouragingly, job prospects improved in the service sector, with the employment reading the highest since April 2008. Price pressures also picked up, with prices rising at their fastest rate since October 2008.

Posted at 08:29PM Mar 03, 2010 by Kelly Board in The Economy  |  Comments[0]