Should Osborne pump billions more into economy? Surge in services sector gives rate-setters a QE headache
Tuesday 05 March 2013
A surprise surge for Britain’s services
firms gave Bank of England rate-setters a huge headache today ahead of a
crucial decision on whether to pump billions more into the recovery.
The Chartered Institute of Purchasing & Supply’s February survey reported the strongest growth in five months for a sector spanning from IT and accountancy to hairdressers and restaurants.
Its activity index, where a score over 50 signals growth, improved to 51.8. Firms won new work at the quickest pace since last May and confidence hit a nine-month high.
Analysts had been braced for more bad news after disappointing updates from manufacturers and builders, potentially tipping the monetary policy committee into voting to extend its £375 billion quantitative easing programme on Thursday.
Governor Sir Mervyn King is one of three rate-setters calling for more action as Italy’s inconclusive election and the onset of “sequestration”, automatic spending cuts in the United States which kicked in on Friday, darken the global backdrop.
Deutsche Bank chief UK economist George Buckley said: “The chance of more QE this week has probably diminished a little. Still, with the economic recovery having remained muted and Italy’s election result raising euro fears again we cannot completely dismiss the risk for further stimulus on Thursday.”
The MPC is ignoring inflation, above its target at 2.7%, for now although the sluggish start to its Funding for Lending initiative will also give the committee food for thought. Lending contracted by £2.4 billion in the second half of last year, figures showed yesterday. Cips said its surveys signalled 0.1% growth in the first quarter of 2013, leaving the UK avoiding a triple-dip recession by a narrow margin. But chief executive David Noble said the improvement among services firms “suggests we might be heading in the right direction at last”. Retailers also saw the strongest growth for three years in February, according to the British Retail Consortium.
Royal Bank of Scotland analyst Ross Walker said: “With stock markets rallying, 10-year gilt yields holding below 2% and trade-weighted sterling down 6% since the start of this year, it is difficult to see what is the pressing need for a QE extension this week.”
- 1 Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
- 2 I might be an MP, but that doesn't stop me fighting sexism with my breasts
- 3 Martha Stewart accuses Snoop Dogg of 'smoking for four hours' during Justin Bieber Roast
- 4 Google April Fools': company unveils backwards search engine and huggable digital assistant
- 5 April Fools' Day 2015: The best hoax news stories from around the internet
Martha Stewart accuses Snoop Dogg of 'smoking for four hours' during Justin Bieber Roast
April Fools' Day 2015: The best hoax news stories from around the internet
April Fools' Day 2015 live: The best pranks and fake stories from around the world
University of Cambridge: Remains of 1,300 scholars are found under building
Turkey power cut: Prime Minister says nationwide blackout could be caused by terrorists
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
The West has it totally wrong on Lee Kuan Yew
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
iJobs Money & Business
£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...
£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...