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Strong UK services sector survey boosts recovery hopes Strong UK services sector survey boosts recovery hopes
(about 6 hours later)
A spring revival for UK businesses has bolstered hopes the economy is picking up pace and managing to overcome the headwinds that have been battering firms in the eurozone. A spring revival for British businesses has bolstered hopes that the economy is picking up and overcoming the troubles engulfing the eurozone.
The latest in a clutch of business surveys to beat expectations on Wednesday indicated that the UK's dominant services sector, which spans hairdressers to banks to transport, enjoyed a jump in activity in March. The resurgence came as new business growth improved and prompted companies to take on staff, according to the latest Markit/Cips UK Services PMI. The latest in a clutch of business surveys to beat expectations indicated that the UK's dominant services sector, which includes hairdressers, banks and transport, enjoyed a jump in activity in March. The resurgence came as new business growth improved and prompted companies to take on staff, according to the latest Markit/Cips UK Services PMI. The survey followed similar reports from the smaller construction and manufacturing sectors this week that have helped cement the view that Britain will avoid recession.
The survey followed similar reports from the smaller construction and manufacturing sectors this week that have helped bolster the view Britain will avoid recession. They contrasted with reports of falling activity across the eurozone, where businesses are suffering from lacklustre demand on the back of the sovereign debt crisis and the threat of recession spreading across the currency area.
Those contrasted with reports of falling business activity across the eurozone, where businesses are suffering from lacklustre demand on the back of the ongoing sovereign debt crisis and the threat of recession spreading across the currency area. In Britain, the upbeat figures prompted forecasters to suggest economic growth may have rebounded strongly to as much as 0.5% in the first quarter, undoing the 0.3% drop in GDP at the end of last year. "Faster growth of services activity in March indicates that the economy is on the up again, skirting recession as business continues to bounce back from the lull seen late last year," said Chris Williamson, chief economist at survey compilers Markit.
In the UK, the upbeat indicators prompted forecasters to suggest economic growth may have rebounded strongly to as much as 0.5% in the first quarter, undoing the 0.3% drop in GDP at the end of last year. The main indicator on the closely watched report rose to 55.3 from 53.8 in February. That was well above the 50-mark dividing contraction from expansion and higher than economists' forecasts of 53.4. Economists said the latest crop of stronger than expected data suggested that the Bank of England would delay making any changes to policy when it makes its latest announcementon Thursday.
"Faster growth of services activity in March indicates that the economy is on the up again, skirting recession as business continues to bounce back from the lull seen late last year," said Chris Williamson, chief economist at survey compilers Markit. However, risks remain from high oil prices, the government's austerity drive and the eurozone debt crisis in the coming months, economists said. Bank governor Mervyn King has also warned that the extra bank holidays for the Queen's jubilee in June could hurt economic output in the second quarter.
The main headline activity reading on the closely watched report rose to 55.3 from 53.8 in February. That was well above the 50-mark dividing contraction from expansion and higher than economists' forecasts for 53.4. But the services report showed business confidence remains fragile. "This is no runaway recovery. Job creation and inflows of new business continue to run well below rates generally seen in the years before the financial crisis," said Williamson.
Economists said the latest crop of stronger-than-expected data in the UK suggested the Bank of England would hold off making any changes to policy when it makes its latest announcement on Thursday.
Risks remain in coming months from high oil prices, the government's austerity drive and the ongoing eurozone debt crisis, economists said. Bank governor Mervyn King has also warned the extra UK bank holiday for the Queen's jubilee in June could hurt economic output in the second quarter.
The services report showed business confidence remained fragile.
"This is no runaway recovery. Although on the rise, job creation and inflows of new business continue to run well below rates generally seen in the years before the financial crisis," said Williamson.
The recent recovery in UK activity contrasted with continued weakness in the eurozone. Services businesses there suffered their second month of falling activity, according to Markit's PMI data. That followed a drop in activity among manufacturers reported earlier this week. After the single currency union's economy shrank at the end of last year, economists warn it will have failed to bounce back in the first quarter of 2012.The recent recovery in UK activity contrasted with continued weakness in the eurozone. Services businesses there suffered their second month of falling activity, according to Markit's PMI data. That followed a drop in activity among manufacturers reported earlier this week. After the single currency union's economy shrank at the end of last year, economists warn it will have failed to bounce back in the first quarter of 2012.
"It is highly likely that the eurozone suffered further modest contraction in the first quarter of 2012 which will put it back into recession," said Howard Archer, economist at IHS Global Insight."It is highly likely that the eurozone suffered further modest contraction in the first quarter of 2012 which will put it back into recession," said Howard Archer, economist at IHS Global Insight.
"The region is still facing major headwinds, notably including increased fiscal tightening in many countries, markedly rising unemployment overall, and increased oil prices. And while eurozone sovereign debt tensions have been eased by the European Central Bank's actions and a second bailout for Greece, the problems are far from resolved.""The region is still facing major headwinds, notably including increased fiscal tightening in many countries, markedly rising unemployment overall, and increased oil prices. And while eurozone sovereign debt tensions have been eased by the European Central Bank's actions and a second bailout for Greece, the problems are far from resolved."
In the US the picture from this week's crop of business surveys was more mixed. The manufacturing sector managed to outstrip expectations but service sector growth slowed more than expected from February's one-year high, according to the Institute for Supply Management. In the US the picture from this week's crop of business surveys was more mixed. The manufacturing sector managed to outstrip expectations, but service sector growth slowed more than expected from February's one-year high, according to the Institute for Supply Management.
Emerging markets also continue to enjoy the kind of growth that has been eluding much of the eurozone, with the latest round of PMI surveys from China, India and Brazil all showing ongoing expansion in March. Emerging markets also continue to enjoy the kind of growth that has been eluding much of the eurozone, with the latest round of PMI surveys from China, India and Brazil all showing expansion in March.