The UK's dominant services firms looked yesterday as though they had finally banished fears of a double-dip recession after roaring ahead at the fastest pace for nearly two years in the first three months of 2012.
A buoyant March performance capped a strong quarter for a sector which accounts for 76 per cent of the economy, according to the Chartered Institute of Purchasing & Supply.
The financial information firm Markit, which compiles the closely watched activity surveys, declared the UK was on course for growth of 0.5 per cent during the first quarter, in a bounceback from the disappointing 0.3 per cent slide in the final three months of last year.
This saves the Chancellor, George Osborne, from the political and economic blow of a renewed technical recession with two successive quarters of contraction. The strength of the surveys will also sharpen the debate among Bank of England rate-setters, whose latest meeting began yesterday. Today the Bank is expected to announce it will not make any changes this month but the apparent recovery signs could swell the ranks of the hawks on the monetary policy committee opposed to pumping an extra £25bn into the economy in May.
The services survey – where a score of more than 50 signals growth – strengthened to 55.3 in March, signalling a faster pace of expansion than economists were expecting. Cips chief executive David Noble said double-dip fears were "unfounded" but warned: "We are not out of the woods by any stretch."
The Bank predicts a "zigzag" path for the economy this year although one-offs such as the Olympics and the extra holidays for the Queen's Diamond Jubilee could hit performance in the April-June quarter. Markit's chief economist Chris Williamson said: "There remains a strong risk that the economy could contract again in the second quarter."
Markit warned that the upturn was far from a "runaway" recovery with hiring and growth in workloads still far below the pace seen before the financial crisis.