By Fiona Shaikh
LONDON, Aug 5 (Reuters) - Britain's services sector unexpectedly surged in July to grow at its fastest pace in more than a year, a survey showed on Wednesday, igniting hopes the economy may have started growing again in the third quarter. The headline business activity index of the CIPS/Markit Purchasing Managers' survey rose to 53.2 in July from 51.6 in June, the highest since February 2008 and beating forecasts for a more modest expansion to 51.8. The index has risen more than 13 points from its record low in November, the most marked improvement in the survey's 13-year history, Markit said.
And coming after figures showing manufacturing activity grew in July for the first time since last March, the data suggest Britain may now be emerging from recession after the second quarter's unexpectedly sharp 0.8 percent fall.
The survey is likely to reinforce expectations the Bank of England will decide not to expand its 125 billion pound ($212 billion) asset purchase programme this week, with policymakers opting instead to take time to gauge the effectiveness of the policy.
A Reuters poll last week showed analysts are split on what action the central bank will take at its two-day meeting which ends on Thursday.
The survey's new business index rose to 52.7 from 49.7, the highest since March 2008, as confidence in the outlook for the economy encouraged firms improved.
"Combined with the positive trends in the construction and manufacturing output balances, July's PMI data provides supportive evidence of overall GDP growth at the start of Q3," said Markit economist Paul Smith.
However, firms were still operating below capacity and continued to shed jobs to try to curb costs as margins came under pressure from rising input prices.
The input prices and prices charged indices were both their highest since November.
Business expectations eased from a 20-month peak hit in June but remained firmly in positive territory, boosted by growing demand and signs the UK was close to coming out of recession, Markit said. (Editing by Andy Bruce)