UK services coming out of recession

Further evidence that the UK could be one of the first major economies to come out of recession comes with a surprise return to growth for the services sector last month.

The CIPS/Markit UK services sector purchasing managers’ index showed a reading of 51.7, just above the critical 50 mark that separates expansion from contraction for the first time since April last year.

The growth in the service sector, which makes up about 75 per cent of UK GDP, pushed the all sector composite PMI to 50.4. The data puts the UK ahead of both the Eurozone and the US whose surveys showed a continuing contraction in May, albeit it at a lesser rate.

However every silver lining has a cloud and many economists have said that rising unemployment and lower consumer spending mean that an output contraction for the second quarter of 2009 is still likely, while not ruling out weak growth in the third quarter.

A more positive outlook was also indicated by the rise in service industries’ business expectations to 69.8 from 64.6 suggesting firms are more upbeat about the future. The service sector improvement mirrors a rise in consumer confidence which according to a new Nationwide report has enjoyed its biggest rise in almost two years.

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