Survey eases fears of economic relapse
Growth in the UK's powerhouse services sector surged last month after the snow and VAT-related setback at the start of the year.
The latest reading from the Chartered Institute of Purchasing and Supply (CIPS) — where a score over 50 indicates growth —registered 58.4, up from 54.5 in January and the highest level for three years.
Some of the month-on-month growth reflected the knock-on effect of snow-related disruption in January, but CIPS said there were also many reports of an improvement in general market conditions. Incoming new business rose steeply, at the fastest pace since September 2007.
Large companies led the upturn, registering a substantial increase in activity, while transport, storage and communications firms recorded the strongest gains in both activity and new business during the month.
With earlier CIPS surveys on the manufacturing and construction sectors holding on to recent gains in February, analysts said yesterday’s research pointed to further growth in GDP in the first quarter of 2010.
Vicky Redwood, senior economist at Capital Economics, estimated quarterly growth in services output of about 1%, up from Q4's gain of 0.5%.
She added: “The survey will ease concerns that the economy may have fallen back into recession this quarter.”
Areas covered by the services sector include transport and communication, financial advice, computing and IT and hotels and restaurants.
CIPS said the rate of job losses in the sector was slower than the record pace seen in early 2009, largely as a result of natural wastage and the non-replacement of leavers.