GROWTH of the UK's dominant services sector accelerated in March to its fastest pace in seven months, although it remained well adrift of the rate achieved in autumn 2013, a survey has shown.
The report from the Chartered Institute of Procurement and Supply (CIPS) prompted Chris Williamson, chief economist at survey compiler Markit, to project UK economic growth would have accelerated slightly to 0.7 per cent in the first quarter.
This forecast is based on the services survey and also reports published by CIPS and Markit in recent days on March activity in the UK manufacturing and construction sectors.
However, Howard Archer, chief UK economist at consultancy IHS Global Insight, stuck with his projection that gross domestic product growth in the first quarter would have matched the 0.6 per cent rate in the final three months of last year.
The UK economy grew by 0.9 per cent in the first quarter of 2014, but expansion slowed during the course of last year.
CIPS's business activity index for services rose from 56.7 in February to 58.9 in March on a seasonally-adjusted basis, moving further above the level of 50 deemed to separate expansion from contraction to signal the fastest growth in this sector since last August. The service sector survey does not include retail.
The business activity index for services had hit 62.5 in October 2013.
The latest survey found that expectations among service sector companies of business activity levels in 12 months' time were at their strongest since May 2014.
CIPS said this positive sentiment was linked to marketing campaigns, new products, foreign investment, export demand, and an improving construction sector.
However, it added that there was a degree of uncertainty associated with the forthcoming General Election, which had weighed to some extent on expectations.
CIPS's survey showed that employment in the UK services sector grew in March at its slowest pace so far this year, although it remained strong by historical standards.
And the rate of new business growth for services companies accelerated in March to the fastest pace since last September, the survey showed.
Predicting UK growth in the opening three months of this year on the basis of CIPS's services, construction and manufacturing reports, Mr Williamson said: "The three PMI (purchasing managers' index) surveys collectively indicate that the economy grew by 0.7 per cent in the first quarter, reviving from the slowdown seen late last year."
CIPS chief executive David Noble said: "Though the rate of increase in levels of employment was not as high as at the beginning of the year, the continuous 27-month rise in employment opportunities will please job-seekers."
However, he added: "Skills shortages...were still in evidence and the demand for higher salaries from skilled staff impacted on input costs for businesses."
Mr Archer said: "With [growth of] incoming new business rising to a six-month high in March, outstanding business rising and business expectations at a 10-month high despite uncertainty over the looming General Election, prospects look bright for the services sector in the near term at least. This was also reflected in robust employment growth in the sector."
He added: "However, we expect that GDP growth came in again at 0.6 per cent quarter-on-quarter in the first quarter. With latest hard data showing dips in industrial production, construction output and services output in January, it looks hard for the economy to have grown by more than 0.6 per cent quarter-on-quarter despite the encouraging surveys."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article