No double dip but UK faces weak recovery

Julian Harris
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BRITAIN’S recovery looks set to be weighed down by sluggish growth, the latest business surveys suggest.

The economy is on course to grow by 0.5 per cent this quarter, according to Markit’s surveys, rebounding from the snow-affected 0.6 per cent contraction in the final three months of last year.

Yet much of the recovery is from activity deferred by December’s snow, “flattering” the figure. Underlying growth is closer to 0.2 per cent for the quarter, Markit said.

Sterling fell 0.4 per cent against the dollar yesterday, as markets absorbed the news.

Services – the UK’s largest sector -- grew last month, but at a slower rate than in January. And stubborn inflation continued to burden the sector, with the rate of price rises “only marginally” slower than January’s peaks.

The purchasing managers’ survey, released yesterday, recorded 52.6 for business activity in the service sector – still above the 50 no change mark, yet down from January’s eight-month high of 54.5.

However, there were some positive signs for the near future, as new business continued to rise. Excluding January, this element of the index was at its strongest since June last year.

And business expectations rose to 71.8, up from 68.3 in January and 66.5 in December, as confidence reached a nine-month high.

“Panellists commented on an improvement in the economic climate and ongoing recovery,” the report said.

Employment in the sector fell again, but at 49.5 the index is approaching parity, suggesting the job losses will soon be curtailed.

Input prices (64.8) continued to reflect higher global costs, with businesses reporting higher fuel and food prices.

And some costs are filtering through to consumers, with prices charged increasing at an index score of 52.8.