The influential S&P Global/CIPS UK services PMI survey showed that the UK’s service sector had bounced back in February in a sign that recession fears are easing as there was a reading of 53.5 in the month up from 48.7 in January.
A score above 50 is considered growth and below this score it is considered that the economy is shrinking.
Falling wholesale gas prices and lower fuel bills bought inflation to its lowest level since June 2021.
Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey, said: “UK service providers moved back into expansion mode in February as fading recession fears and improving business confidence resulted in the strongest rise in new orders since May 2022.
“However, elevated borrowing costs and stretched household finances remained constraints on growth.
“Service providers appear confident that demand remains sufficiently resilient to pass on higher costs to clients.
“The latest survey indicated that business activity expectations rebounded to their highest since March 2022, helped by reduced political uncertainty, an improving global economic outlook, and hopes that peak interest rates are on the horizon.”
Dr John Glen, chief economist at the Chartered Institute of Procurement and Supply (CIPS), added: “Inflationary pressures still had a vice-like grip on some business costs such as energy prices and salary demands from workers struggling with their own cost-of-living crises.
“However, the slowest rise in total input prices since June 2021 offered some respite.”