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January data suggests UK economy gathering strength

January data suggests UK economy gathering strength

Fears of a slowdown in UK economic growth have been soothed by stronger than expected survey data this week.

The purchasing managers’ index (PMI) surveys for the construction, manufacturing and services sectors all indicated the sectors had expanded at a faster pace than expected in the first month of this year.

The positive readings marked a rebound after growth in all three sectors had slowed in December, sparking fears the UK economic recovery was stumbling to a halt.

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Data from the Office for National Statistics had found UK GDP growth slowed to 0.5 per cent in the final quarter of 2014, a reading which had been foreshadowed by previous PMI data that found activity in the three main sectors fell towards the reading of 50 that marks the line between contraction and expansion.

But all three sectors registered strong expansion in January, with the services sector recording a reading of 57.2, construction at 59.1 and manufacturing at 53.

All three readings were higher than in December and higher than consensus expectations.

Capital Economics said the PMI readings, combined with other indicators, suggested “early 2015 appears to have seen a renewed acceleration” in UK economic growth.

The firm said May’s general election “might lead to a period of political uncertainty that dampens sentiment” but said it was “relatively confident the recovery will not lose pace”.

Capital Economics pointed out the boost to discretionary spending from a lower oil price had yet to feed through, while there has also been data that pay growth is strengthening, which will likely lead to more disposable income and higher expenditure.