Services sector leads economy boost
- Credit: PA
Britain's powerhouse services sector grew at its fastest pace in seven months in March as the pace of the wider economic upturn picked up over the first quarter, according to new figures.
Services, which represent more than three-quarters of UK output, gave a reading of 58.9 last month on the closely-watched CIPS/Markit purchasing managers' index (PMI) survey - where 50 separates growth from contraction.
Together with figures from other sectors, it indicates that gross domestic product (GDP) grew by 0.7% in the first three months of this year, up from 0.6% in the final quarter of 2014.
The reading from the services sector, an improvement on the 56.7 seen in February, was the best since August last year. Manufacturing figures for March published last week had also shown a pick-up though construction growth slowed.
It comes as the latest growth indicator from the CBI also pencils in an uptick in growth to 0.7% for the first quarter.
Chris Williamson, chief economist at Markit, said: 'The UK economy moved up a gear in March, recording the strongest pace of growth since last August.
'The three PMI surveys collectively indicate that the economy grew by 0.7% in the first quarter, reviving from the slowdown seen late last year.
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'Faster growth of new business and improved expectations of prospects for the year ahead also bode well for the upturn to retain strong momentum as we move through the spring.'
Services firms attributed growth to the wider economic recovery, improving confidence, winning new customers and product development, the report found.
The survey showed a marked increase in the volume of new business, while expectations were at their strongest since May last year. The sector continued to add jobs though the pace was the slowest for three months.
Samuel Tombs, of consultancy Capital Economics, said it 'provides further reassurance that the economic recovery is still on a fast track despite the uncertainty created by the upcoming general election'.
The figures come two days ahead of the last meeting of the Bank of England's interest rate-setting Monetary Policy Committee (MPC) prior to the General Election.
Rates have been held at 0.5% since the height of the downturn in 2009 but despite the recovery, policy makers are not thought to be close to a hike, with inflation at zero and economic uncertainties weighing on UK's outlook.
Howard Archer, chief UK and European economist at IHS Global Insight, said: 'The improved, upbeat collection of March purchasing managers' surveys reinforce our belief that the next policy move by the Bank of England will be to hike interest rates.
'However, the Bank of England will clearly sit tight at its April MPC meeting on Thursday, and the odds currently seem to favour the Bank of England holding off from raising interest rates until the early months of 2016.'