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Data boosts hopes that UK slump is over

HOPES that the UK recession ended in the last quarter of 2009 were boosted yesterday by service sector data for December showing the strongest growth in new orders in over two years.

The latest survey of purchasing managers in services companies, the so called “engine room of the UK economy”, showed activity edged up to 56.8 from 56.6 in November. Any number above 50 indicates expansion.

The Chartered Institute of Purchasing and Supply and Markit (CIPS/Markit), who collate the data, said the numbers suggested that the service sector expanded by one per cent in the last three months of 2009.

The modest improvement in the services PMI index follows a strong gain in the equivalent manufacturing survey. CIPS/Markit said the business activity index rose to 56.8 from November’s 56.6, slightly above economists’ forecasts and just below October’s 27-month high of 56.9. “December’s report on services provides further evidence that the economy moved decisively out of recession in the fourth quarter,” said Vicky Redwood, economist at Capital Economics.

“With the manufacturing and construction surveys also rising in December, the quarterly average of the three surveys is on the face of it consistent with a rise in GDP in the fourth quarter of 0.6 per cent or so.”

The UK has been suffering its deepest recession since quarterly records began in the 1950s, and after a surprise contraction in the third quarter remained in decline after most other big economies returned to growth.

Economists said that the survey suggested there would be sustained recovery in 2010, though an end to temporary government support measures such as a cut in value-added tax and subsidies to buy new cars would limit growth.

Chancellor Alistair Darling has said he expects the economy to return to growth in the fourth quarter.