Surprise Service Sector Growth, but Inflation Up Too; ECONOMICS

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Byline: By Nevill Boyd Maunsell Economics Editor

Britain's service economy shrugged aside its mid-winter gloom with a surprise spurt of growth last month in terms of both activity and sales - but accompanied by a fresh surge of inflation in both costs and prices charged.

February's headline index of service activity published by the Chartered Institute of Purchasing and Supply and NTC Research rose to a reading of 54 on a scale where anything above 50 indicates expansion, the 58th month of unbroken growth.

A reading of 54 the sub-index registering incoming new business showed orders growing more strongly than at any time for five months and a marked recovery from a four-and-a-half-year low in November. There were still signs, though, of clients hesitating to commit themselves to new spending.

Cost were more daunting than ever, rising faster than at any time in this survey's 12-year history - and companies responded by raising their charges, also at a record pace.

"It is encouraging to see signs of recovery across the UK service sector after a strained period of economic uncertainty and downturn," said Roy Ayliffe, director of professional practice at the CIPS. "Particularly encouraging is the improvement in the financial intermediation and hotels and restaurants sectors, which have suffered the most in recent months. …