A report released this morning showed that the UK service sector saw an increase in activity in February, for the second consecutive month.
The news contrasts with recent reports of downturns in manufacturing and construction during February and raises hopes that the economy may avoid a triple-dip recession.
Building on the growth registered in the first month of the year, the seasonally adjusted Business Activity Index for the service sector stood at 51.8 in February, above January’s 51.5 and a five-month high. Any reading over 50.0 signals an increase in activity.
The UK Services Purchasing Managers’ Index, compiled by the Chartered Institute of Purchasing & Supply (CIPS) and financial information services firm Markit, covers a wide range of businesses in the service sector, including transport & communication, financial intermediation, business services, personal services, computing & IT and hotels & restaurants.
The compilers of the February survey noted that more than 23% of respondents had recorded increased activity since January, with anecdotal evidence suggesting that stronger client demand had led to the development of new projects and larger client bases.
New business increased at the fastest pace for nine months and the improving business environment meant that confidence also continued to improve, with the level of optimism regarding future activity lifting to a nine-month high.
Chris Williamson, chief economist at Markit, commented that last month’s faster growth of the dominant services sector means that the overall economy is likely to have grown for a second successive month, after the downturn late last year.
He also pointed to the fact that service sector confidence about the year ahead rose to its highest level since last May, contributing to a further rise in employment “and adding to the sense that the economy is reviving, albeit sluggishly and somewhat hesitantly, rather than sliding back into another recession.”