Service sector activity hits three-year high

By Rory Gallivan

Date: Wednesday 03 Mar 2010

Activity in the UK’s dominant services sector rose at a better-than-expected rate in February, reaching a three-year high.

A survey by the Chartered Institute of Purchasing and Supply (CIPS) and the information group Markit found the purchasing managers’ index rose to 58.4 from 54.5 in January. The figure for February was ahead of expectations and is the highest reading since January 2007.

A reading above 50 means that more than half of managers surveyed saw a rise in activity.

‘February's report on service sector activity indicated a marked rebound from the snow-related slowdown in January,’ said Paul Smith, an economist at Markit.

‘The latest data confirm that the underlying trend in the private service sector remains positive, and is on course to deliver a quarterly expansion above 1 percent in the first quarter.’

Howard Archer, chief UK and European economist at IHS Global Insight, said the data was welcome given the dominant role of the service sector in the UK economy.

The better-than-expected service sector data add to optimism that the UK economy is recovering, following strong figures from the manufacturing sector on Monday.

The CIPS/Markit purchasing managers’ index for manufacturing stuck at 56.6 last month, the same as in January and the best number since October 1994.

That easily beat forecasts for a dip to 56.4.

However there was more sobering data yesterday from the construction sector, which is still contracting. The Purchasing Managers Index for the sector in February came in below expectations of 48.9 at 48.5 (seasonally adjusted), and was also down from January’s figure of 48.6.

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