The UK's all-important services sector, which accounts for more than three-quarters of the nation's GDP, confounded economists' expectations in February with an increase in output.

Services sector increases in output in February

The sector had been predicted to fall below a reading of 50 in an index where any reading below that mark indicates decline.But the IHS Markit/CIPS services purchasing managers' index (PMI) showed a reading of 51.3 last month, up from a two-and-a-half-year low of 50.1 in January.The index was released as a report from the UK auto industry showed a surprising rise in car sales in February after five months of decline.

Services numbers show fastest falling in hirings for seven years

However, the services PMI also showed the fastest fall in hirings for seven years - a fact attributed not only to Brexit uncertainty but to the shortage of suitably qualified recruits.IHS Markit said that the month's disappointing PMIs for both construction and manufacturing suggested the economy would grow by just 0.1 per cent in the first quarter - a slowdown reflected across the European Union, not just because of Brexit but because of a global downturn in growth.Chris Williamson, chief business economist at IHS Markit, said, "The latest PMI surveys indicate that the UK economy remained close to stagnation in February, despite a flurry of activity in many sectors ahead of the UK's scheduled departure from the EU.

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Disappoint figures for manufacturing and construction

"Worse may be to come when pre-Brexit preparatory activities move into reverse. Many Brexit-related headwinds and uncertainties also look set to linger in coming months even in the case of Prime Minister May's deal going through."Business optimism about the year ahead has consequently sunk to the lowest ever recorded by the survey with the exceptions of the height of the global financial crisis and July 2016."Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said he was concerned that both new orders and employment fell last month,"Job losses continued in February, as businesses held back on hiring without the confidence of new pipeline work and ability to recruit skilled candidates. Staffing levels were down at the fastest rate in over seven years," he said."In signs of more economic stress, intense competition and discounting strategies prevented output price inflation gathering pace, falling to its lowest for five months."Consumer and client confidence disappeared from the sector, as the hesitancy to place orders also rippled out from Europe. Survey respondents said anxious international clients cancelled contracts and delayed decisions."

Car sales increase in February

Meanwhile, the Society of Motor Manufacturers and Traders (SMMT) reported that demand for new cars unexpectedly rose by 1.4 per cent in February, which is traditionally one of the slowest months for car sales ahead of new number plates being issued in March.A total of 81,969 new cars was registered last month compared with 80,805 during February 2018. Sales of petrol models increased by 8.3 per cent year-on-year, while diesel sales declined by more than 14 per cent.Mike Hawes, SMMT chief executive, said, "It's encouraging to see market growth in February, albeit marginal, especially for electrified models."Car makers have made huge commitments to bring to market an ever-increasing range of exciting zero and ultra low emission vehicles, and give buyers greater choice."These cars still only account for a fraction of the overall market, however, so if the UK is to achieve its electrification ambitions, a world-class package of incentives and infrastructure is needed."

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