‘Fading recession fears’ boost optimism as services sector bounced back to growth in February
The UK’s service sector bounced back to growth in February as business optimism improved and activity expanded at the fastest pace since June.
The S&P Global/CIPS UK services PMI survey showed a reading of 53.5 in February, up from 48.7 in January and slightly ahead of market expectations.
Any score above 50 is considered growth while a reading below indicates the economy is shrinking.
It marks the first time since August that business activity and incoming new work both expanded.
Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey, said: “UK service providers moved back into expansion mode in February as fading recession fears and improving business confidence resulted in the strongest rise in new orders since May 2022.
“However, elevated borrowing costs and stretched household finances remained constraints on growth.
“Service providers appear confident that demand remains sufficiently resilient to pass on higher costs to clients.
“The latest survey indicated that business activity expectations rebounded to highest since March 2022, helped by reduced political uncertainty, an improving global economic outlook, and hopes that peak interest rates are on the horizon.”
Press Association – PA reporters
Will the UK avoid a recession?
This week, analysts from the world of banking and finance have largely predicted the UK will swerve a recession – two consecutive quarters of negative growth.
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On Wednesday, it was reported that British factories are performing better than expected, according to the S&P Global and the Chartered Institute of Procurement and Supply’s (CIPS) final purchasing managers’ index (PMI) for the UK manufacturing sector.
It nudged higher from an earlier estimate to 49.3 points last month. That reading was above the consensus forecast but still below the 50 point threshold that separates growth and contraction, meaning factory activity dropped in February.
Meanwhile, optimism among company leaders jumped 11 points to minus 17 this month, shifting it back to levels seen when the government launched Plan B measures to deal with the omicron Covid-19 variant.
Figures compiled by the Institute of Directors (IoD), signalled the underlying strength of the UK economy is a lot better than people feared at the turn of the year.
However, uncertainty over whether the UK economy would tip into recession this year has led London businesses to sweat over their finances.
Optimism among the capital’s companies slid 19 points in February to 18 per cent, arresting a steady upward rise in confidence, according to Lloyds Bank’s business barometer.
But it wasn’t all doom and gloom, with EY reporting last week that London will power the UK economy out of recession and is poised to be the fastest growing area in the country.