Service sector set to reinforce hope of avoiding double-dip

Critical data out today was expected to show that Britain’s dominant services sector remained in growth territory last month, reinforcing hopes that a double-dip recession may yet be avoided.

The latest purchasing managers’ index (PMI) report for the sector, which accounts for nigh on three-quarters of the economy, was tipped to show output growing, albeit only modestly. Any reading above 50 for the main activity index denotes expansion.

It follows yesterday’s news that construction companies have grown more optimistic about their business prospects for the year ahead despite a slower expansion in activity last month.

January’s Markit/Cips construction PMI survey revealed the second-largest monthly jump in business confidence in the study’s history, fuelling expectations that growth may pick up again during 2012.

Cips chief executive David Noble said: “It’s clear that many businesses have replenished their levels of optimism and have high expectations for improving economic conditions and new contracts.”

The headline activity index slipped to 51.4 from 53.2 in December as growth in new orders slowed and some existing contracts were completed.

The signs of increased confidence among construction firms came a day after Cips said the manufacturing sector had expanded at the fastest pace since last March.

Markit economist Sarah Bingham said the construction report suggested that growth may resume in the coming months.

“On top of the surprisingly strong start to 2012 reported by the sister survey of manufacturing, it will raise hopes that a slide back into recession may yet be avoided,” she added.