Service sector grows for eighth month but Nationwide says consumer confidence is falling

By MARTINA LEES
Updated:

Recovery hopes were boosted today by figures showing growth in the crucial service sector for the eighth month in a row.

The latest index by the Chartered Institute of Purchasing and Supply (CIPS) gave a score of 56.8 for December, up from 56.6 the previous month.

A figure above 50 suggests growth rather than contraction.

City of London workers

The services industry makes up 70 per cent of the GDP

The service sector makes up about 70 per cent of the gross domestic product. As a result, the data reinforced beliefs that Britain's longest and deepest post-war recession has ended.

CIPS chief executive David Noble CIPS, said: 'Last year saw the UK service sector recover at an extraordinary rate and end 2009 on a high.

'As the biggest contributor to the UK economy, services is undoubtedly heralding the way for wider economic growth in 2010.'

Vicky Redwood, senior UK economist at Capital Economics, said the figures 'provided further evidence that the economy moved decisively out of recession in the fourth quarter'.

However, separate figures released today showed consumer confidence fell at its fastest rate for more than a year in December.

Nationwide said fears over tax increases - including this month's return to 17.5 per cent VAT - caused its consumer confidence index to drop five points to 69. This was the biggest slide since November 2008.

Martin Gahbauer, Nationwide's chief economist, said: 'The five-point fall in confidence in December suggests that an element of caution may have begun to creep back into the minds of consumers over the Christmas period.

'Although it is still early days, these lower expectations may foreshadow a more sluggish consumer outlook in 2010 as stimulus measures are withdrawn.

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