Service sector lifts revival hopes

Hopes that the worst of the recession may have passed were fuelled today after the service sector enjoyed a better-than-expected month in April.

A report found decline in the sector, which includes financial firms, hotels and restaurants and transport, and is the driving force of the economy, slowed last month.

But house prices fell again in a stark reminder that although the pace of deterioration in the economy may be slowing, recovery is still some way off.

Richard McGuire, a fixed income strategist at RBC Capital Markets, warned that "the markets tend to blur the distinction between bottoming out and recovery".

The Chartered Institute of Purchasing and Supply said its index of activity for services rose from 45.5 in March to 48.7 in April — trumping the 46.3 reading expected in the City.

But it remained below the 50 cut-off between growth and contraction, meaning the sector has been in recession for 12 months.

CIPS director Roy Ayliffe said: "Employment continues to bear the brunt of the battle as jobs were slashed at an exceptional rate. It is unlikely that the scars inflicted over the last year will fade quickly."

Mortgage lender Halifax said house prices fell 1.7% last month and are now where they were five years ago.

Average UK house prices slumped to £154,716, down 17.7% on a year ago.