Services sector gives hope of Britain beating triple dip

BRITAIN’S dominant services industry grew at its strongest pace in five months in January, a small boost to chances the country might narrowly skirt a new recession.

Output in the sector, which accounts for more than three quarters of the economy, rose 0.3 per cent in January from December, the Office for National Statistics said yesterday. That was its best performance since August although the data can often prove volatile.

Separate surveys showing that house prices posted their first annual rise in more than a year and consumer confidence held steady, albeit at low levels, added to a picture of a slow and delicate recovery.

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Jens Larsen, chief European economist at RBC Capital Markets, said the services data suggested zero growth in the economy in the first quarter.

That would mean Britain escapes a recession – as defined by two consecutive quarters of contraction – by the narrowest possible margin.

Other economists thought Britain’s economy shrank in the January-March period, an embarrassment for the government which is sticking to its fiscal austerity push.

“Today’s data wasn’t a disaster, but is it good enough?” said Alan Clarke, economist at Scotiabank. “It’s a close call but my feeling is a triple-dip recession is more likely than not.”

Weak as it is, Britain’s economy is not as fragile as some in Europe, according to forecasts from the Organisation for Economic Co-operation and Development released yesterday.

They showed Britain was set to outperform France and Italy, but not Germany, in the first two quarters of 2013.

Yesterday’s services data feeds into the ONS’s calculation of gross domestic product. A first reading of GDP in the January-March period is due to be released on April 25.

On a year-on-year basis, services output was up 0.8 per cent, the ONS said.

A separate Purchasing Managers’ Index survey of Britain’s services industry released earlier this month also showed the sector holding up.

Its performance contrasts with a weaker picture in manufacturing. Official data showed earlier that manufacturing output fell in January at the fastest pace since June.

Helping services in January was activity in the transport, storage and communications sector as well as in business services and finance. Cold weather and snowfall in the month held back trade at some smaller retailers and at pubs and bars.

Another long spell of cold weather in March could prove the factor that pushes Britain’s economy into a new recession.

In the three months to the end of January, services output was down 0.2 per cent compared with the three months to the end of October when the London Olympics boosted the economy.