Strong UK service sector growth

The UK’s service sector recorded its strongest expansion in seven months in March, concluding a quarter of growth that will have been mirrored in the wider economy, a survey showed on Thursday.

The seasonally adjusted purchasing managers’ index (PMI) for the service sector rose to 52.4 in March from 51.8 in February, data from a survey by Markit Economics and the Chartered Institute of Purchasing and Supply (CIPS) showed.

The service sector accounts for about three-quarters of UK economic activity. The UK economy contracted by 0.3% in the final three months of 2012, and if it shrinks in the first quarter of this year, the UK will enter its third recession in five years.

However, the strength of the reading will keep alive hopes that the dominant sector grew enough to offset the shrinkage reported in PMI surveys of the smaller manufacturing and construction sectors in March.

Firms increased their workforces for the third successive month, though at a marginal rate, due in part to anticipation of further sales wins in the coming months. Input costs faced by service providers increased further in March despite easing to the lowest level so far this year. At the same time, companies tried to protect margins by increasing their own charges.

Chris Williamson, chief economist at Markit, said business activity in the service sector grew in March at the fastest rate since the Olympics-related upturn seen last August.

“A gathering upturn in the service sector in March looks to have helped the UK avoid a triple-dip recession by the narrowest of margins,” he said.

Official data on how the economy fared in the first quarter is not due until April 25 but it looks to have made a decent start after an Office for National Statistics release showed the strongest growth in services in five months in January.

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