Service firms boost recovery hopes
Updated on 04 November 2009
The UK's services firms have fuelled recovery hopes after a survey showed the sector growing at its fastest rate for more than two years in October.
The Chartered Institute of Purchasing and Supply's (CIPS) activity index - where a score over 50 indicates growth - registered 56.9 last month, the strongest reading since September 2007.
This is the sixth successive month of growth recorded by the survey, which CIPS said "bodes well" for a wider market pick-up.
But the recent strength of services firms as shown by the survey has wrongfooted experts who expected the powerhouse sector to bring the UK economy out of recession between July and September.
Two weeks ago official figures showed the economy shrinking by a shock 0.4% - with a 0.2% decline over the quarter for services firms, which represent almost three-quarters of the economy.
CIPS said there were signs of greater confidence among clients to commit to previously delayed spending plans, although job losses continue to rise steeply.
Firms' input costs are also coming under pressure from higher fuel bills and a weaker exchange rate for imports, it added.
Chief executive David Noble said: "We can't forget that these are rocky times.
"Despite another round of cost inflation, firms are working hard to secure new business wins by squeezing output prices further. Growing levels of unemployment are another reminder of how difficult things still are."
The Bank of England's Monetary Policy Committee (MPC) is expected to boost its quantitative easing programme by a further £50 billion in a sign that the UK economy is not yet out of the woods.
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