HOPES for a renewed economic recovery were bolstered yesterday as influential survey data pointed to robust growth in the service sector last month – the largest part of the British economy.
The figures came as the Bank of England surprised economists by resisting pressure to print more money, keeping interest rates and its quantitative easing (QE) programme on hold.
Last month the decision to hold was “finely balanced” for some members of the monetary policy committee (MPC) – but despite the clouds gathering over the Eurozone, they refused to try to stimulate growth further.
Markit’s purchasing managers’ index (PMI) for the service sector held firm at 53.3 yesterday, the same level recorded in April.
Any figure above 50 rising economic activity in the month.
That level was supported by a quicker pace of incoming new business, a reading that rose from 53.5 to 54.8.
This continued expansion fed into employment growth, which came in at 52, only slightly slower than the 52.2 recorded in April. Such “solid” growth in employment will be particularly welcome for its impact on the wider economy.
The outlook for future business also improved, but at a slowing pace – the business expectations index slid from 72.6 to 69.2 on fears over the impact of the growing Eurozone crisis.
Economists had also been worried about the state of the economy after the manufacturing PMI showed output fell in May and the construction sector’s growth slowed.
“These results come as something of a relief after the sharp decline in activity reported in the manufacturing survey last week,” said economist Andrew Goodwin from the Ernst & Young Item Club.