Fears of double-dip recession 'unfounded' as British services sector posts robust growth
BRITAIN’S dominant services sector has posted its strongest quarterly growth almost two years, completing a triple boon for the economy that suggests the UK managed to avoid a double-dip recession.
Service sector employment, which encompasses jobs from banking to retail, rose at its fastest rate for four years over the first quarter, according to the closely-watched Markit/CIPS survey.
Companies also reported a rise in volumes of new business, and said they were able to squeeze more business from existing clients.
On a monthly basis, the Markit/CIPS services PMI rose to 55.3 in March from 53.8 in February, far above the 50 level than divides growth from contraction. Economists had expected expansion in the sector to slow in March, forecasting a fall in the PMI to 53.4.
David Noble, chief executive of the Chartered Institute of Purchasing & Supply, said the PMI data demonstrated that "fears of a double dip recession were unfounded".
Chris Williamson, chief economist at Markit, suggested the British economy had grown by as much as 0.5pc in the first quarter, with the services sector, which accounts for around 75pc of the British economy, expanding by around 0.7pc.
Today's services data rounds-off a positive month for the economy that saw the UK's manufacturing and construction sectors expand at a faster pace than economists had expected.
But Mr Williamson described it as "no run-away recovery". "Job creation and inflows of new business continue to run well below rates generally seen in the years prior to the financial crisis,” he said.
Samuel Tombs, UK economist at Capital Economics also highlighted that the strong rise in the services PMI failed to account for a recent decline in activity on the high street.
"Moreover, even if the economy did grow in Q1, the prospect of a renewed rise in tensions in the euro-zone, further fiscal austerity and high oil prices suggest that the economy will struggle to expand in the coming quarters," he added.
Yesterday, the British Chambers of Commerce said that the UK will avoid a double-dip recession, though its Director General John Longworth called on the government to "urgently tackle short-term stagnation and a lack of business confidence, damaged by the ongoing eurozone crisis," describing the recovery as "much too slow".
Across Europe, the decline in Spanish services growth eased to 46.3 in March, from 41.9 the month before. However, Markit reported that employment had declined at a "considerable, and accelerated pace," with job losses across all six of Spain's service sectors.
Staffing numbers also continued to decline in Italy, while services growth in Europe's powerhouse economy, Germany, slowed to 52.1 in March, from 52.8 in February.