A survey has shown that growth in Britain's service sector picked up to its fastest pace in five months in February. But inflation pressures surged at their strongest pace in at least 12 years.
The surprising resilience of the sector reinforced expectations that the Bank of England would keep interest rates on hold when it meets this week.
The CIPS/NTC said its activity index for the services industry rose for a third month to 54 in February from 52.5 in January, the strongest since September. Analysts had forecast a fall. Any reading above 50 indicates expansion.
Britain's services sector, which accounts for around three quarters of the economy, has grown every month for nearly five years although the pace slowed sharply towards the end of last year.
Euro zone services growth also staged a comeback in February as a buoyant France and recovering Germany offset a further contraction in Italy and Spain.
Today's UK survey showed higher food and energy prices were raising firms' costs. It also showed firms were being successful in passing on the bulk of these costs to customers.
The input price index rose to 65.6 last month from 63.8 in January while the prices charged index rose to 56.8 from 55.3. Both readings for February were the highest since the series began in July 1996.
