UK services sector back on growth track

The UK was back on the growth track following the 0.3 per cent slide in the final three months of last year, according to economists. This comes on better-than-expected activity in the services sector, which includes a range of businesses from hotels to accounting firms and contributes three-quarters of national output.

The Markit / CIPS Purchasing Managers' Index (PMI),  a gauge whose 50 plus reading signaled growth, was up at 51.5 from 48.9 in December – the first time the sector declined in two years.

Adding to the upbeat sentiment the outlook remained positive across the board. Confidence bounced to its highest level since May, with stronger demand driving new orders despite the poor weather, while employment was the largest for six months. The reading, which beat forecasts of 49.5,  comes after the upbeat manufacturing PMI, which showed output in UK factories growing at the fastest rate for 16 months in January.

According to Chris Williamson, Markit's chief economist, a huge sigh of relief accompanied the numbers, as a return to growth of the service sector in January, greatly reduced the likelihood of the UK slipping back into triple-dip recession.

The improvement comes as surveys earlier this week that showed business had regained its lost confidence, suggesting the economy a possible recovery in first quarter of 2013. The findings have been reinforced by the improvement in the PMI.

In a separate development signs of recovery were seen from the eurozone on Monday, though there were huge regional differences. Though Germany powered ahead, France's fortunes suffered a decline.