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UK services sector grows at fastest pace in 4 months in February

The U.K. services sector grew at its fastest pace in four months in February led by the strongest rise in new work since May 2017.

The seasonally adjusted UK services business activity index increased to 54.5 in February from 53.0 in January, according to the latest purchasing managers' index data released by IHS Markit and the Chartered Institute of Procurement and Supply.

Business-to-business sales grew significantly during the month against the backdrop of improving global economy, but domestic consumer demand remained subdued due to stretched household budgets. The pace of backlog accumulation increased to its fastest rate since August 2017 as incomplete business increased further in the month.

Input price inflation moderated to its lowest level since August 2016, and prices charged by service sector firms slowed to a six-month low. Efforts to expand business capacity and stronger-than-expected sales growth led to the fastest rate of hiring since September 2017.

"With Bank of England policymakers sounding hawkish even following the January fall in the PMI to a one-and-a-half-year low, the February upturn in the surveys surely leaves a May rate hike very much in play," said Chris Williamson, chief business economist at IHS Markit.

"The bank seems keen to normalise interest rates even if output growth is below levels it would usually like to see when tightening policy."