Powerhouse services fire up UK economy
BRITAIN’S service industries “leapt into action” last month to provide a clear sign the economy has turned a corner.
Activity across the sector, which includes hotels, restaurants, IT and communications and generates about 80 per cent of overall output, surpassed expectations to hit a 16-month high.
Firms are at their most optimistic for the year ahead since May 2015, and with surveys also showing improvement in manufacturing and construction, analysts believe the economy is on track to grow by up to 0.4 per cent in the first quarter.
But figures from the Society of Motor Manufacturers (SMMT) reported a 7.3 per cent drop in January new-car registrations following a 36 per cent collapse in demand for diesel vehicles, the weakest performance since 2000.
The Markit/CIPS purchasing managers’ survey found the services sector expanding for the first time since last August as the drag from delayed decision-making lifted after the general election. New orders grew at the fastest pace since June 2018, export sales returned to growth and firms took on staff for the third straight month.
Duncan Brock, director at the
Chartered Institute of Procurement & Supply, said: “If political stability is maintained throughout the year with political promises becoming reality, then 2020 could become a stellar year for service companies.”
Research consultancy Capital Economics said the purchasing managers’ data points to GDP growth in the first quarter and the next move in interest rates could be up.
ITEM Club chief economic adviser, Howard Archer, sees the economy potentially growing by 0.4 per cent from the previous quarter.
But SMMT chief executive, Mike Hawes, said: “Consumer confidence is not returning to the [new car] market.”