Service sector growth likely to save UK from a triple-dip recession
Thursday 04 April 2013
Britain looked to set to escape a triple-dip recession today as the economy’s dominant services firms enjoyed their strongest growth spurt since the Olympics.
The Chartered Institute of Purchasing & Supply’s latest activity index — where a score over 50 signals growth —improved to 52.4 in March. This was the best since last August when the Games gave a much-needed fillip to the economy.
Chris Williamson, chief economist at survey compiler Markit, said: “The Government and Bank of England will breathe sighs of relief in seeing signs of a gathering upturn.”
Markit’s surveys — closely watched by the Bank of England — are consistent with 0.1 per cent growth in the first three months of 2013, avoiding a technical triple-dip recession after a 0.3 per cent decline in the final quarter of last year. The independent Office for Budget Responsibility also forecasts a slim 0.1 per cent advance for the economy at the beginning of this year.
Despite poor weather during March, firms took on staff and saw the steepest rise in new business since May last year. Official data, which lags the surveys, also revealed an encouraging start to the year for the services sector with a 0.3 per cent rise in output during January.
Cips chief executive David Noble said: “It seems that the service sector has finally found the ingredients, which if mixed correctly, may well result in the right recipe for sustained growth in 2013. Growth at the present rate remains tepid and below the long- run average.
“However, there are signs that underlying trends are improving, even defying and limiting the effect of the bad weather on firms.”
Although the triple-dip is more politically embarrassing than economically significant, experts said a decline could not be entirely ruled out in the Office for National Statistic’s first estimate of GDP, due in three weeks’ time.
This is because the official figures are more sensitive to one-off events such as the Olympics and the Queen’s Jubilee celebrations.
Deutsche Bank’s chief UK economist George Buckley said: “The purchasing managers indices are not a perfectly accurate gauge of GDP growth — they are typically a better indicator of underlying growth as they don’t usually pick up the excessive volatility in the official figures.”
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