Service industries show surprise recovery

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The Independent Online

Hopes of a synchronised global business recovery rose yesterday after new figures showed an unexpectedly large revival in services activity in the UK, the US and the eurozone last month.

Hopes of a synchronised global business recovery rose yesterday after new figures showed an unexpectedly large revival in services activity in the UK, the US and the eurozone last month.

Britain's services sector appeared to be on the brink of a return to growth, as a survey showed that it came within a whisker of recording its first expansion since August.

The report, by the Chartered Institute of Purchasing and Supply (Cips), showed that the volume of new orders rose for the first time in five months. The sector makes up two-thirds of economic output.

Cips said the sectors hit hardest in the wake of 11 September and the military response in Afghanistan had showed the strongest recovery. This included travel, transport, hotels and restaurants.

An equivalent survey in the US showed that services firms enjoyed their second successive month of growth in December.

The Institute for Supply Management said it was the first back-to-back monthly increase since February and March, when the United States dipped into recession.

Ralph Kauffman, director of the ISM survey, said it pointed towards the beginning of a recovery. "I'm encouraged that this very likely is showing the beginning of a broad turnaround," he said.

The buoyant mood was supported by data showing that US firms shed fewer jobs in December than at any time in the last four months, suggesting the worst is over for the labour market.

Payrolls declined by 124,000 last month after falling by 371,000 in November and 448,000 in October, the Labor Department said.

The benchmark 30-year Treasury bond – a bellwether of interest rate expectations – fell more than a full point on hopes that the US was poised to emerge from recession.

Analysts were cautiously optimistic although some pointed out that this simply put the economy back on its level before 11 September.

In the 12-nation eurozone, still celebrating the successful launch of euro notes and coins, its business activity index rose close to the point that marks recovery. "Each of the countries covered by the survey recorded either an easing in the rate of contraction or an outright increase in business activity during December," said NTC Research, which compiles the survey.

Meanwhile inflation fell to 2.0 per cent in December, putting it back within the European Central Bank's range of zero to 2 per cent for the first time in 19 months. The news eased concern that the physical launch of the euro on 1 January would push up prices.

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