–Mar Services PMI 55.3 Vs 53.3 Median, 53.8 In Feb
–Easing Input Cost Pressures May Help Reassure BOE MPC Hawks
–Markit’s Williamson Says Stronger Growth Will Stay BOE MPC Hand

LONDON (MNI) – The latest Markit/CIPS purchasing managers’ services
sector survey showed the sector putting in a surprisingly strong
performance in March.

Markit said that the three PMI surveys seen this week
(manufacturing on Monday and construction on Tuesday) showed that the
UK economy had avoided a slide back into recession and were consistent
with 0.5% growth in Q1 (in line with the BOE’s own February forecast).

Unlike other surveys in this series this week, input costs eased –
in this case to their slowest pace since August 2010.

Chris Williamson of Markit said that the strength of the economy as
reflected in these surveys would stay the BOE MPC’s hand on further
asset purchases in coming months.

“PMI data signalled that UK economic growth picked up in March to
round off the strongest quarter for a year. The surveys therefore
indicate that the UK economy has escaped a slide back into recession,
and also suggest that the Bank of England will hold off on further asset
purchases unless the economic situation deteriorates in coming months”.

Williamson said that the upturn in business confidence in both
construction and service sectors bodes well for future growth, though
he warned that soft underlying order books might weigh on manufacturing.

The Queen’s Jubilee celebrations could also be expected to dampen
GDP growth, Williamson said.

“There remains a strong risk that, unless business activity picks
up further, the economy could contract again in the second quarter.
Despite this, the strengthening of the economy in March suggests that
the Bank of England’s Monetary Policy Committee will leave policy
unchanged and is likely to revise up its growth forecast in the spring
Inflation Report. Further quantitative easing is only likely if the
economic data turn down meaningfully in coming months.”

–London newsroom 0044 207 862 7492; email: dthomas@marketnews.com

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