'Triple Dip' Recession Fears In Markit Survey

There are fresh fears that the UK economy is sliding towards a triple dip recession this year after output slipped in the final quarter of 2012.

Output contracted by 0.2%, according to an eagerly awaited indicator for the economy.

The Markit/Cips Purchasing Managers' Index (PMI) survey for December found that activity in the powerhouse service sector shrank for the first time in two years.

The index suggested that the economy as a whole has slipped back into contraction during the last three months.

Markit/Cips said the figures, combined with mixed manufacturing and construction figures earlier this week, suggest Britain's economy suffered a bigger drop than most other private sector forecasts.

"The first fall in service sector activity for two years raises the likelihood that the UK economy is sliding back into recession," Markit chief economist Chris Williamson said.

The figures dampen hopes of recent upbeat surveys and official services data for October that Britain would be able to power out of a fourth-quarter contraction.

A fresh fall in GDP, just three months after Britain officially emerged from its second recession since the global financial crisis, would undermine Government economic policy.

"The data today on the services PMI are quite discouraging," Societe Generale economist Brian Hilliard said.

"This is quite worrying. It does suggest that as we come to the turn of the year the economy's been losing momentum, so it doesn't augur well for growth.

"I think (the data) will make it clear to the Bank of England that they should consider more easing, but the point is in the short term at least it's coming in the form of the Funding for Lending scheme and the data on that are quite encouraging."

Markit/Cips said the PMI dropped to 48.9 in December - its lowest level since April - from 50.2 in November.

It is the first time the index has fallen below the 50 mark that separates growth from contraction since December 2010, when unusually heavy snow disrupted many businesses.

Separate BoE figures released on Friday morning showed the biggest monthly rise in mortgage approvals since January 2012.

The bank said mortgage approvals reached 54,036 in November, up from 53,071 in October.

Before the financial crisis in 2008 monthly mortgage approvals ran at around 90,000 and were a major driver of consumer spending.