UK services sector growth eases in February

5th Mar 2024 10:23

(Sharecast News) - The UK services sector continued to grow in February, albeit at a slower pace, according to a survey released on Tuesday.

The S&P Global/CIPS services purchasing managers' index fell to 53.8 from 54.3 in January, coming in below the first estimate and consensus of 54.3. However, the index was still higher than at any point in the second half of 2023.

The composite PMI - which measures activity in both the services and manufacturing sectors - rose to 53.0 from 52.9. This was below consensus and the flash estimate of 53.3.

Tim Moore, economics director at S&P Global Market Intelligence, said: "Another solid expansion of business activity across the service sector in February adds to signs that the UK economy has turned a corner after entering a technical recession during the second half of 2023.

"New business intakes were a particularly bright spot as service providers reported the fastest order book growth since May 2023. Survey respondents cited rising business and consumer spending, linked to improved optimism towards the broader economic outlook. Resilient export sales also provided support to service sector growth, as signalled by the strongest rise in new work from abroad for eight months."

Rob Wood, chief UK economist at Pantheon Macroeconomics, said: "Don't focus on the small drop in the services PMI in February, which is probably noise; it remains comfortably in expansionary territory.

"Meanwhile, the composite PMI improved slightly, reflecting the large jump in the manufacturing output balance to 48.3 in February, from 45.5 in January. Overall, the PMI data continue to suggest the economy has escaped the minor recession it experienced in the second half of last year. The composite PMI is consistent quarter-on-quarter growth in GDP of about 0.25% in Q1.

"The PMI details suggest solid growth will continue. Businesses were the most upbeat about the year-ahead outlook since February last year and more optimistic than on average between 2012 - when the question was first posed - and 2019. That optimism partly reflects increasing incoming business, as the new orders index improved to 52.3 in February - the best since May last year- from 52.2 in January. Firms also reported that expected interest rate cuts were driving better customer demand."