http://www.telegraph.co.uk/finance/e...behind-us.html
Services data show worst of recession could be behind us
The worst of the UK recession could be behind us, the latest survey from the services sector suggests.
New business and output fell again in January, but the pace of decline was slower than December, according to the services Purchasing Managers’ Index (PMI), published on Wednesday.
The headline activity index rose for a second month in a row, to 42.5 in January from 40.2 in December, where anything below 50 represents a contraction in activity and anything above marks an increase.
The services industry is a crucial part of the UK economy, accounting for 75pc of gross domestic product, so the improvement in January will be taken as an encouraging sign that the lowest point of the cycle has been passed. It hit its lowest point in the survey’s 13-year history in November.
On another positive note business expectations in the services sector made it back into positive territory, rising to 55.9 last month. That was the highest level since September last year, before the financial crisis intensified with the collapse of Lehman Brothers in October.
“Today’s PMI data just could mark the start of the turnaround,” said Benjamin Williamson, economist at the Centre for Economics and Business Research. Vicky Redwood at Capital Economics agreed that the report “suggests that the worst of the recession may have been seen in the fourth quarter.”
Today’s survey followed the manufacturing and construction PMIs earlier in the week, which also showed the pace of decline slowed in January.
However, economists warned that although the survey showed an improvement in the sector, the figures also indicated that activity was still contracting sharply, and the Bank of England’s Monetary Policy Committee was therefore unlikely to be deterred from cutting interest rates again tomorrow.
“Policymakers will be pleasantly surprised by today’s release but will by no means be putting the champagne on ice. We still expect the Bank of England to announce another 50 basis point reduction in the official Bank Rate tomorrow. Today’s data, whilst welcome, is unlikely to change that outcome,” said Mr Williamson.
The survey said that employment, which is usually a lagging indicator, fell at a record rate in the services sector in January.
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One swallow does not make a summer.
Services data show worst of recession could be behind us
The worst of the UK recession could be behind us, the latest survey from the services sector suggests.
New business and output fell again in January, but the pace of decline was slower than December, according to the services Purchasing Managers’ Index (PMI), published on Wednesday.
The headline activity index rose for a second month in a row, to 42.5 in January from 40.2 in December, where anything below 50 represents a contraction in activity and anything above marks an increase.
The services industry is a crucial part of the UK economy, accounting for 75pc of gross domestic product, so the improvement in January will be taken as an encouraging sign that the lowest point of the cycle has been passed. It hit its lowest point in the survey’s 13-year history in November.
On another positive note business expectations in the services sector made it back into positive territory, rising to 55.9 last month. That was the highest level since September last year, before the financial crisis intensified with the collapse of Lehman Brothers in October.
“Today’s PMI data just could mark the start of the turnaround,” said Benjamin Williamson, economist at the Centre for Economics and Business Research. Vicky Redwood at Capital Economics agreed that the report “suggests that the worst of the recession may have been seen in the fourth quarter.”
Today’s survey followed the manufacturing and construction PMIs earlier in the week, which also showed the pace of decline slowed in January.
However, economists warned that although the survey showed an improvement in the sector, the figures also indicated that activity was still contracting sharply, and the Bank of England’s Monetary Policy Committee was therefore unlikely to be deterred from cutting interest rates again tomorrow.
“Policymakers will be pleasantly surprised by today’s release but will by no means be putting the champagne on ice. We still expect the Bank of England to announce another 50 basis point reduction in the official Bank Rate tomorrow. Today’s data, whilst welcome, is unlikely to change that outcome,” said Mr Williamson.
The survey said that employment, which is usually a lagging indicator, fell at a record rate in the services sector in January.
=============================
One swallow does not make a summer.
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