Services pick-up lifts economic growth hopes

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IMPROVING activity in the UK’s powerhouse services sector has added to hopes that economic recovery has extended into the second quarter of the year.

Official figures show that sector – which accounts for more than three-quarters of the British economy – benefited from a pick-up in output among distribution firms, the finance industry and hotels and catering companies.

The Office for National Statistics said overall services activity during April edged up 0.2 per cent on the previous month, and was 2 per cent higher than a year earlier, pointing towards an acceleration in the economy as a whole.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “We currently estimate that GDP growth improved to 0.5 per cent in the second quarter, from 0.3 per cent in the first quarter.

“There is a very real possibility that growth could be stronger still, given that manufacturing output looks likely to have expanded in the second quarter and even the long-suffering construction sector could have eked out some growth.”

Markit chief economist Chris Williamson said the upbeat figures made it “increasingly unlikely” that the Bank of England will opt to extend its £375 billion quantitative easing programme at next week’s meeting of the monetary policy committee (MPC), which will be the first to be chaired by incoming governor Mark Carney.

Carney’s predecessor, Sir Mervyn King, had been pressing for an additional £25bn of asset purchases since February, but was outvoted by other MPC members.