UK services sector's unexpected surge boosts economy Firms reported they were employing more workers, spurring a fifth straight monthly rise in services sector employment. Photograph: Alamy The economy regained some of its former vibrancy in May after a bigger than expected surge in services activity showed that all major sectors are now growing for the first time in a year. Following figures earlier this week that found the construction and manufacturing sectors back in positive territory during May, the CIPS/Markit survey of the services sector showed it expanded more strongly than expected. The broad-based recovery is likely to end the debate about a triple-dip recession, especially after the economy grew in the first quarter of the year by 0.3%. It is now showing every sign of outstripping that figure in the second quarter. Markit said an increase in new business was behind much of the rise in its index of services activity to 54.9, up from April's 52.9. The index signalled a rate of growth that was the sharpest since March 2012, it said. With sales up and the cost of production remaining steady, the profitability of the UK corporate sector should be more upbeat, but the Markit profitability index came in below the key level of 50 - the mark that separates growth from contraction. "The latest fall in profitability was the 12th in successive survey periods, although the rate of decline was the slowest in this sequence," it said. Where a fall in profits was reported, a number of companies blamed a combination of discounting and higher input costs. In contrast, other respondents signalled that higher sales and associated growth in turnover had supported profitability in the three months to May. Nevertheless, firms reported that they were employing more workers, spurring a fifth straight monthly rise in services sector employment. Alan Clarke, chief UK economist at Scotia Bank, struck a note of concern after he asked whether the bounce from last year's lows was likely to last more than a few months. I remain a little sceptical that this momentum can be maintained. In particular, with government spending growth about to stall and real household disposable income growth turning negative I struggle to see how this sort of pace of growth can be maintained," he said. Some economists have argued that the recent better economic news merely reflects a rebound from the artificially low activity last year when firms, spooked by the euro crisis and the UK's double-dip recession, cut investment spending and reduced stocks. Capital Economics, which has consistently warned that the UK faces a Japanese-style lost decade of low growth, said the figures remained subdued for an economy recovering from a severe recession, though any talk of recession was now in the past. The firm's UK economist, Martin Beck, said: "Following a run of generally good economic news in recent weeks, May's UK CIPS/Markit report on services provides another indication that the economy may be turning a corner. The activity index rose from 52.9 to 54.9, the fifth consecutive monthly increase and the highest reading since March 2012. What's more, the CBI's recent services sector survey also suggested growing momentum in services activity. With May also seeing improvements in the manufacturing and construction CIPS, a weighted average of the three surveys points to quarterly GDP growth of about 0.5%. While such a rate would still be pretty modest for an economy emerging from a long period of recession and stagnation, signs that the recovery may be establishing some momentum are becoming more convincing.