Service sector averts slump

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An upturn in the service sector in March could have helped the UK avoid a triple-dip recession by the narrowest of margins, according to global financial information services company Markit.

“Business activity in the service sector grew in March at the fastest rate since the Olympics-related upturn seen last August,” says Chris Williamson, chief economist at Markit, which compiles the regular Purchasing Managers Index survey of economic activity.

Mr Williamson says the upturn provided “a much needed boost to the economy in the first quarter after disappointing surveys for the smaller manufacturing and construction sectors both signalled contractions.”

He warned that the weakness of private sector growth means UK GDP – an important indicator of economic growth – could be flat or even decline, if government sector output falls.

“This is clearly a far from satisfactory pace of growth, although anecdotal evidence from survey contributors indicated that poor weather has caused disruptions to many businesses in recent months, meaning the underlying recovery trend is likely to be stronger than the recent data suggest,” said Mr Williamson.

“We would therefore expect to see faster economic growth in the second quarter, barring any surprises such as a further worsening of the eurozone crisis or further severe weather.

“The prospect of faster growth in coming months is supported by companies’ views on expected future activity levels, which were the most buoyant since last spring.”