By William Schomberg and Olesya Dmitracova
LONDON, March 28 Britain's dominant services
industry grew at its strongest pace in five months in January, a
small boost to chances the country might narrowly skirt a new
Output in the sector, which accounts for more than three
quarters of the British economy, rose 0.3 percent in January
from December, the Office for National Statistics said on
That was its best performance since August although the data
can often prove volatile.
Separate surveys showing that house prices posted their
first annual rise in more than a year and consumer confidence
held steady, albeit a low levels, added to a picture of a slow
and delicate recovery.
Jens Larsen, chief European economist at RBC Capital
Markets, said the services data suggested zero growth in the
economy in the first quarter.
That would mean Britain escapes a recession - as defined by
two consecutive quarters of contraction - by the narrowest
Other economists thought Britain's economy shrank in the
January-March period, an embarrassment for the government which
is sticking to its fiscal austerity push.
"Today's data wasn't a disaster, but is it good enough?"
said Alan Clarke, economist at Scotiabank. "It's a close call
but my feeling is a triple-dip recession is more likely than
Weak as it is, Britain's economy is not as fragile as some
in Europe, according to forecasts from the Organisation for
Economic Co-operation and Development released on Thursday. They
showed Britain was set to outperform France and Italy, but not
Germany, in the first two quarters of 2013.
SERVICES FIRM, FACTORIES STRUGGLE
Thursday's services data feeds into the ONS's calculation of
gross domestic product. A first reading of GDP in the
January-March period is due to be released on April 25.
On a year-on-year basis, services output was up 0.8 percent,
the ONS said.
A separate Purchasing Managers' Index survey of Britain's
services industry released earlier this month also showed the
sector holding up.
Its performance contrasts with a weaker picture in
manufacturing. Official data showed earlier that manufacturing
output fell in January at the fastest pace since June.
Helping services in January was activity in the transport,
storage and communications sector as well as in business
services and finance. Cold weather and snowfall in the month
held back trade at some smaller retailers and at pubs and bars.
Another long spell of cold weather in March could prove the
factor that pushes Britain's economy into a new recession.
In the three months to the end of January, services output
was down 0.2 percent compared with the three months to the end
of October when the London Olympics boosted the economy.
Separately, the ONS reported that productivity across all
sectors of the economy, as measured by output per hour, fell 0.5
percent in the fourth quarter compared with the third quarter.
That was the sixth successive decline in British
productivity by that measure. Britain has seen rising employment
but falling output per worker, which many economists say could
reflect companies' desire to keep employees on their books while
offering them lower wage growth, rather than firing them.
But some say the productivity numbers might be a sign of
something more worrying.
"There is a growing focus on 'zombie' companies that are
essentially being kept alive by low interest rates and banks'
reluctance to write off loans," said Howard Archer at IHS Global
Insight, adding that would prevent new firms from succeeding.
Unit wage costs rose 0.5 percent in the October-December
period compared with the previous three months.