Are you being served? Yes. UK services sector grew in January

Luckily for the UK economy, services are up. We were served 0.3% more in January than we were in December.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
Yesterday, the ONS confirmed that GDP contracted 0.3% in the final three months of 2012 and economists feared the worst. What are the chances of avoiding a dreaded triple dip when January is traditionally so weak?

However, latest figures show that the UK services sector in fact grew 0.3% in January, up 0.8% on last year - the largest increase since last summer, when the Olympics helped boost the economy.

This despite the adverse weather conditions that have stymied retail sales and manufacturing: retail sales slumped 0.7% during the month, and industrial production suffered a shock 1.2% fall.

And given that the services sector accounts for around three-quarters of all activity in the economy, and PMI data suggests that things are already looking good for February, the odds of a recovery in Q1 are slowly rising.

The UK economy is not out of the woods yet, however. This growth rate is extremely weak, even if you take into account the headwinds from the eurozone, the fall-out from Cyprus and rising prices and weak pay growth at home. Most economists reckon that even if we escape another contraction in the first three months of this year, the economy will be stagnant at best.

The enduring cold snap in March has certainly not helped to raise the mercury in our optimism thermometer either.

Triple dip or no triple dip, the continuing weakness of the economy is bad news for George Osborne and the Bank of England. Further credit rating downgrades could be on the cards if a significant uplift does not materialise.

Only last week, the independent Office for Budget Responsibility forecast that the UK's economy would see growth of only 0.6% this year, half what it predicted a few months ago. Sterling is still under a lot of pressure and the resultant rise is exports has not materialised. Made in Britain isn’t selling even at these bargain basement prices.

The winter of our economic discontent shows no signs of abating…

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