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UK Service Economy Maintains Robust Pace in February: Markit

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UK Service Economy Maintains Robust Pace in February: Markit

The UK service economy continued to expand strongly in February, with business confidence rising to multi-year highs.

Markit Group’s gauge of UK service activity rose from 58 to 58.2, narrowly exceeding forecasts. UK services PMI has been above the 50 level that separates expansion from contraction for 14 consecutive months.

Service activity was bolstered by a sharp rise in new business growth, which put pressure on existing capacity. Backlogs of work increased for the eleventh consecutive month, prompting businesses to boost hiring plans. February witnessed the strongest pace of job creation since October, with nearly one-fifth of managers signaling a rise in staffing levels.

Business expectations improved for the fourth consecutive month, reaching the highest level since September 2009. More than half of purchasing managers surveyed expressed positive sentiment toward recovery, a sign more businesses are planning to raise investment in marketing and expansion.

“Sustained strong growth in the services sector means it remains the most important driver of the economic recovery,” wrote Markit chief economist Chris Williamson in a press release. “Alongside vibrant growth in manufacturing and construction, the upbeat picture of the services economy points to the country enjoying another quarter of robust economic growth of approximately 0.7 [percent].”

As business confidence rises and economic recovery deepens, the UK could be headed for its best year since 2007, Williamson added. At this rate, UK gross domestic product should easily eclipse the 1.8 percent growth pace seen last year.

The accelerated pace of UK recovery puts the focus back on the Bank of England, which is trying to manage rate hike expectations amid all the good news. The BOE rate decision scheduled for Thursday is expected to reveal no changes to monetary policy.

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