Services sector leads drive to escape the recession

By SCOTT REID
Published on 05/09/2012 00:00

Britain’s powerhouse services sector gathered pace last month as companies clinched new business in a fresh sign that the country may be edging out of recession.

The positive findings should reduce the pressure on the Bank of England to step up stimulus for the economy at tomorrow’s rate-setting meeting.

The jump in the Markit/Cips purchasing managers’ index (PMI) for the sector – more than two-thirds of the economy – from 51 in July to 53.7 last 
month topped even the most optimistic analysts’ forecasts. Any figure above 50 denotes expansion.

However, Markit’s chief economist, Chris Williamson, questioned whether the services bounce-back could be sustained.

“It is concerning that the upturn in activity was not matched by a similar rise in hiring, with employment in the service sector instead growing at the slowest pace since February,” he noted.

The report was issued yesterday afternoon just hours after it emerged that commercial construction activity had fallen for the first time in two and a half years, dealing a fresh blow to an industry struggling for traction.

Figures revealed that Britain’s construction sector as a whole unexpectedly shrank last month as weak demand for commercial, public and residential properties continued to plague the nation’s builders. The construction PMI showed overall activity in the sector fell to 49 in August from 50.9 the previous month, marking the second-lowest reading since February 2010.

Governments on both sides of the Border have been hoping that a string of major infrastructure projects would help to turnaround industry fortunes and create much-needed jobs.

But despite signs of a revival in other areas, such as housebuilding, business leaders have called for more to be done.