Growth in the service sector triggers a recovery in the first three months

An unexpected growth in the service sector has lead to the recovery in the UK economy in the first three months of 2011. The Markit/CIPS services PMI index, a measure of activity growth as reported by purchasing managers, surged to a 13-month high of 57.1 in March from an unrevised 52.6 in February, beating even the most optimistic analyst’s forecast.

Purchasing Managers Index (PMI) is an indicator for economic activity. It reflects the percentage of purchasing managers in a certain economic sector that reported better or worse business conditions than in the previous month. Purchasing Managers Indices (PMIs) are calculated on a monthly basis by polling businesses which represent the make up of the underlying economy. The index is designed to measure the number of firms where the economic activity has increased, decreased or remained the same.

However, the sustainability of the increase is questionable as some firms reported benefiting from a spurt of public spending in March, the end of the last fiscal year before big government spending cuts begin.

According to experts, the 4.5% increase in January was the highest since the scale started in 1996, when activity rebounded strongly after contracting due to December’s unusually heavy snow. The Data company Markit believes that based on March’s figures it estimates that British GDP grew 0.8 percent in the first quarter of the year, up from a 0.5 percent forecast.