By Dow Jones Business News, March 05, 2013, 05:35:00 AM EDT
LONDON--An increase in new business helped lift an index of the U.K.'s services sector to a five-month high in
February, a development which may stay the hand of the Bank of England for another month, and also suggest the economy
may eke out some growth in the first quarter of this year.
A monthly survey of purchasing managers published Tuesday by data compilers Markit rose to a balance of 51.8 in
February. That was the highest level since September and compares with January's 51.5.
Economists surveyed by Dow Jones Newswires were expecting the index to slip to 51.0.
A balance above 50 signifies expansion, below that figure means a contraction.
"Faster growth of the dominant services sector offset downturns in manufacturing and construction during February,
meaning the economy is likely to have grown for a second successive month after the downturn late last year," said Chris
Williamson, chief economist at Markit. "So far, the PMIs suggest that the economy will have grown by 0.1% in the first
quarter," he added.
The surprise increase in the services PMI follows a robust retail sales performance in February, which, according to
the British Retail Consortium, surged to a two-month high of 2.7% compared with February 2012.
The services sector accounts for around 76% of U.K. economic output, so if the key sector can maintain this level of
growth into March, the economy should avoid a second straight quarterly contraction in the first quarter of 2013, which
means the BOE will likely keep policy on hold for another month.
"The improvement in February's U.K. Chartered Institute of Purchasing & Supply report on services could well be the
decisive factor that stays the Monetary Policy Committee's hand at Thursday's meeting," said Vicky Redwood, chief U.K.
economist at Capital Economics.
The details of the survey show that incoming new business, employment levels and confidence all grew in February, at
the fastest pace in nine months, the survey showed.
There was some bad news in the release as input prices rose at the fastest pace for more than a year and service
providers passed some of that increase onto their customers.
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