A May surge for the UK's dominant services firms yesterday fuelled hopes of growing momentum behind the economic recovery.
Just weeks after fears of a triple-dip recession dominated the agenda, the UK is on course for two successive quarters of growth for the first time since 2011 following data from the Chartered Institute of Purchasing & Supply. Its monthly snapshot of services activity, where a score over 50 signals growth, hit a healthy 54.9 in May, higher than expected by the City, and well above April's 52.9. The sector – accounting for three-quarters of the economy and businesses, from IT and accountancy to hotels and restaurants – was buoyed by the sharpest rate of new business growth since February 2010, Cips added.
The buoyant survey completes a hat-trick of good news this week as construction moved back into growth and manufacturing accelerated – marking the first time all three sectors have seen expansion for more than a year.
Chris Williamson, the chief economist at the survey compiler Markit, said the overall economy would expand by 0.5 per cent between April and June, accelerating from the 0.3 per cent seen in the first quarter, if the current pace of growth continues.
The upbeat news came on the eve of the Bank of England's latest rate-setting decision today, marking the outgoing Governor, Sir Mervyn King's, last Monetary Policy Committee meeting. Sir Mervyn, an ever-present for 16 years on the MPC since the Bank's independence in 1997, is calling for more quantitative easing, although he looked likely to be outvoted.
Economists said the improving economic picture could also confound expectations that Sir Mervyn's successor, Mark Carney, will embark on more QE.
Ross Walker, an economist at Royal Bank of Scotland, said: "Even if the data only shows a near-term improvement, it is hard to see how a Carney-led BoE would implement more radical monetary policy loosening against the backdrop of an acceleration in GDP to trend-like growth rates."
"Mark Carney's appointment as BoE Governor is looking less like the biggest 'hospital pass' in central banking and more like a remarkable piece of timing and good fortune."
The Cips survey showed backlogs of work grew for the second month in a row for the first time since 2007.
There were also signs that the Government's Help to Buy initiative is finally working after a 15 per cent rise in the number of first-time buyers.
Reeds Rain and Your Move owner LSL Property Services reported 22,000 first-time-buyer transactions in April, up 2,900 from March.