Hopes rise that UK might avoid recession after services sector rebound

theguardian.com:

A rebound across the UK’s services sector in February has raised hopes that the country might avoid recession in the first half of this year.

Analysts said the bigger than expected surge in business activity appeared to show that the UK would narrowly avoid a recession, though the squeeze on consumer spending from the energy crisis and a struggling manufacturing sector would continue to put the brakes on the economic recovery.

The pound edged up by more than half a cent to hit $1.211, the highest since last Wednesday as foreign exchange analysts calculated that stronger economic growth would increase the chances of further interest rate rises by the Bank of England to cool inflation.

Bank of England rate-setters said in their most recent outlook for the UK economy they expected gross domestic product (GDP) to shrink by about 1% across this year and the first quarter of 2024, making it the only G7 nation to suffer a recession in 2023.

The early or “flash” measure of private sector activity by S&P Global/Cips found that the services industry index jumped to an eight-month high of 53.3, where a figure above 50 indicates expansion.

The index shows how much firms have increased production, employment and their order books to achieve a rounded measure of commercial activity.

Services companies, which make up about three-quarters of private sector activity, reported a stronger demand for business services “amid an improving global economic outlook and reduced domestic political uncertainty”.

Chris Williamson, the chief business economist at S&P Global Market Intelligence, which compiled the index, said business confidence was damaged in the second half of last year, which was characterised by a fractious Conservative party leadership