Growth in Britain’s service industries slowed last month, but firms became more confident, stepping up hiring and raising wages after an increase in new business.
The services purchasing managers’ index (PMI) from Markit/CIPS slipped more than economists expected, to 56.7, from 57.2 in January.
Vicky Redwood, chief UK economist at Capital Economics, described the fall as “a bit of a disappointment, but hardly a disaster”.
Rob Wood, chief UK economist at Berenberg bank, said: “Despite a small dip, the UK services PMI points to strong growth.”
In the eurozone, Markit’s composite PMI, which measures services and manufacturing activity, suggests the bloc’s economy is on course to growth by 0.3% in the first quarter, the fastest rate in seven months. Bailed-out countries Spain and Ireland continue to enjoy the fastest expansion.
The UK economy is growing twice as fast as the eurozone, Markit has calculated. Following buoyant PMI surveys for manufacturing and construction earlier this week, the research firm said the reports pointed to economic growth of 0.6% in the first three months of this year, up on the 0.5% in the final quarter of 2014.
Chris Williamson, chief economist at Markit, said: “The combination of relatively robust economic growth, the improving labour market and signs that wage growth will pick up in coming months suggests the Bank of England will come under increasing pressure to tighten policy later this year.”
Wood concurred, saying: “Notwithstanding today’s headline disappointment on the PMI, the economy seems to be growing faster and tightening more than the Bank of England had factored in. For that reason, we look for the first Bank of England rate hike in February 2016 and we expect them to hike rates faster than the market expects.”
The jobs measure in the services survey edged up to 57.3 in February, the second-highest level in the survey’s 19-year history after a record peak was hit last June. Markit said cost inflation picked up from January’s low, amid reports of suppliers raising prices and higher wages being paid.
Business expectations edged up to a three-month high, with nearly half of companies forecasting a rise in activity from present levels in 12 months’ time.
