Recovery signs hit rate cut hopes

ANY lingering hope that the Bank of England will cut interest rates this week was smothered today by news that the service sector has rebounded and green shoots of recovery are emerging in the manufacturing sector.

The January poll of service firms by CIPS/Reuters showed activity expanded for the first time since last August. The survey's headline business activity index registered 51.4, above the crucial 50 'boom-bust' level and up from December's 49.4.

Finance, IT and business-to-business sectors all reported solid growth during the month. About a fifth of all respondents said new business had risen as a result of improved confidence. Optimism about business activity levels surged to a seven-month high.

Meanwhile, a separate survey from the CBI revealed manufacturing orders over the past four months fell at the fastest rate for two and a half years. CBI chief economist Ian McCafferty said: 'The slight recovery in sentiment is encouraging but there is a long way to go before manufacturing is out of the woods.'

An interest rate decision from the Bank's monetary policy committee is expected at noon on Thursday. Sterling was steady at $1.4230.