UK may avoid double-dip recession
News that the UK’s service sector grew more than expected last month has generated optimism that the economy could avoid falling back into recession.
The Markit/CIPS Purchasing Managers Index (PMI) for the service industry increased to 55.3 in March, from 53.8 in February, with a reading of above 50 representing growth.
Growth in the service sector during the first quarter reached its highest level since the second quarter of 2010.
The sector, which includes a diverse range of companies, accounts for nearly three quarters of the UK economy.
The manufacturing and construction sectors have also grown, contributing to 0.5 per cent growth in the UK economy in the 2012 first quarter.
Chris Williamson, chief economist at Markit, said: “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.”
Fears that the UK was facing a double-dip recession were prompted by a contraction in the economy in the final quarter of 2011, after the eurozone debt crisis deteriorated.
Markit/CIPS also reported an increase in staffing levels in the service sector.
Last month the OECD warned that the UK’s economy would shrink by 0.1% in the first quarter of 2012.
As it also contracted in the final quarter of 2011, this would have placed the UK back in recession, which is technically defined as two consecutive quarters of contraction.
Yesterday the British Chambers of Commerce warned that unemployment will increase to 2.9 million over the next year.
The organisation is calling on the government to take “forceful” measures to encourage growth in the UK economy, which it expects to grow by just 0.6% in 2012.
John Longworth, director general of the BCC, said: “The UK economy is still facing huge challenges and the recovery is much too slow.
“The UK has the potential to recover but to achieve that the government has to set businesses free to grow.”