Service sector growth points to improvement in UK economy in March

PMI figures for services indicate faster 2015 growth than in the same period in 2014

The UK service industry reported that March brought the strongest increase in business activity for six months (AFP/Getty Images)

The UK service industry reported that March brought the strongest increase in business activity for six months.

The Markit Purchasing Managers’ Index for services, which compares growth in services with the previous month, rose from 56.7 in February to 58.9 in March – anything over 50 signals growth.

This pace of expansion was the fastest since August. The first three months of 2015 scored higher on average than the first three months of 2014, signalling that business owners are more confident and more willing to expand.

New marketing campaigns and the introduction of new products has increased competition, according to David Noble, group chief executive officer at the Chartered Institute of Procurement and Supply.

“The heightened positivity for the future… combined with the rise in activity in the construction and manufacturing sector, all point toward an overall healthier UK economy,” Noble said.

Chris Williamson, chief economist at Markit, which compiles the survey, said that the survey data shows that employment growth is close to record highs. Combined with current low levels of inflation, high employment should improve consumer spending. While that could suggest the need for an interest rate hike, Williamson said such low inflation should delay a change in interest rates through 2015.

Other measures of workload, volume of new business and rate of growth of new contracts also improved. Business expectations were at their highest since May 2014, though Markit said some responses indicated that the upcoming election was weighing on business managers’ expectations.