By Daniel Hunter
Jeremy Cook, chief economist at foreign exchange company, World First, said that despite today’s (Monday) service sector data showing the slowest rate of growth for three months, it is still positive news for the UK.
The headline seasonally adjusted Business Activity Index registered 53.8 in February, down from January’s 56.0, which, according to Cook, is not as bad as it might seem.
“Although this figure is a miss on expectations, it should still be considered positive news for the UK. I think even the most ‘bearish’ of commentators will concede that a double-dip recession is now unlikely,” Cook said.
“The services sector has continued to expand for the 14th consecutive month; a much better performance than counterpart service sectors in the EU. The expectations component rose to its highest in a year.
“This does not eliminate fears of a ‘slow grind’ throughout 2012, however, and we must watch the impact of oil price shocks on demand carefully.”
Meanwhile, David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said that confidence amongst businesses remains high.
“Businesses in the services sector remain decidedly confident this month, based on expectations for activity growth and perceptions that the Eurozone crisis may be starting to stabilise,” he said.
“Buoyed by the steady growth in business activity since the start of 2011, admittedly below pre-recession levels, there is still much to feel upbeat about.]
“The biggest challenge for businesses in the current operating environment is to protect margins in a market where customers have the upper hand on pricing. Although input cost rises continue to ease, the pressure to discount and undercut the competition is acute.
“The expansion of headcount is also a casualty of this pressure, as businesses look to control costs and maximise the resources already available to them. Employment levels are likely to stay broadly flat until there is a more pronounced and sustained growth in activity.”
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