Belfast Telegraph

Services growth boosts hopes of economic recovery

By Jamie Grierson

Hopes for the UK recovery have lifted after official figures showed the powerhouse services sector grew at its fastest rate in nearly nine years in January.

The index of services showed services output rebounded by 1.3% month-on-month in January after plunging 1.1% in snow-hit December, the Office for National Statistics (ONS) said. This was the fastest growth since July 2002.

The improvement in the services sector, which makes up 75.8% of the total economy, was spread across all sectors, but was particularly pronounced in hotels and restaurants, which saw a 3.1% increase in output.

Economists said the improved figures would boost hopes the economy had returned to growth in the first quarter after it went into a shock 0.5% decline in the final three months of last year.

While January's bounceback is encouraging, evidence has emerged of a significant slowdown in consumer spending in the last three months.

The last Markit/CIPS Purchasing Managers' Index (PMI) survey showed a slowdown in the services sector in February as the industry battles rising prices and weakened consumer confidence.

Howard Archer, chief UK and European economist at IHS Global Insight, said he expected gross domestic product to grow 0.7% in the first quarter of 2011.

But he warned: "It is also important not to read too much into the jump in services activity in January."