Thursday, April 04, 2013
Services keep the economy growing
Posted by David Smith at 10:00 AM
Category: Thoughts and responses

Though the manufacturing and construction purchasing managers' indices edged up in March, only the service-sector PMI is in expansionary territory (above 50). It rose from 51.8 to 52.4 in March. Though this is no guarantee that overall GDP will rise in the first quarter, it is mildly encouraging.

The deatils were also encouraging, specifically:

"Business activity in the UK service sector continued to increase during March. Growth was solid and the strongest since last August as incoming new work also rose at an accelerated rate. Payroll numbers increased, albeit at a fractional pace, while confidence in the outlook improved to the highest for ten months.

"The headline seasonally adjusted Business Activity Index registered 52.4 in March. That was up from February’s 51.8 and the best reading for seven survey periods. Solid growth was achieved despite a number of reports that poor weather had weighed on activity.

"Increased service sector output was supported by a marked rise in new business. Latest data showed growth was the steepest since May 2012, with companies commenting on an underlying strengthening of market demand."

This is the verdict of Chris Williamson of Markit: "With growth of the service sector offsetting contractions in manufacturing and construction, the PMI survey data collectively point to the economy having grown by a mere 0.1% in the first three months of the year. This is clearly a far from satisfactory pace of growth, although it is likely that the poor weather caused disruptions to many businesses in recent months, meaning the underlying recovery trend is likely to be stronger than the recent data suggest."

Forward-looking indicators point to a stronger growth picture in the second quarter, Markit added.