Hopes rose today that Britain is set to emerge from the worst of the recession, as new figures revealed a dramatic easing in the slump in the country's services sector, high street sales and house prices.

Food costs also fell, as a number of economic indicators appeared to herald the arrival of the long-awaited green shoots in the UK economy.

"I would say there's green shoots visible but there's still some weeds around them," said Howard Archer, the chief UK and European economist at IHS Global Insight.

"There's a significant amount of data over maybe the last couple of weeks that do suggest that the rate of decline is slowing really quite appreciably compared to the first quarter of the year."

Figures from CPIS/Markit today showed that activity at service companies, which account for nearly three quarters of the country's gross domestic product (GDP), rose to 48.7 in April, well above analysts' expectations.

Although any figure below 50 on the closely watched gauge indicates contraction, the figure - up from 45.5 in March - is the highest reading since August 2008 and the biggest rise in the index since April 1999. Nearly half of the companies questioned said they expected activity to have increased in a year's time.

Meanwhile, the chief executive of Next said today that he believed the high street had come through the worst of the downturn, as the clothing and homeware retail chain reported better than expected first-quarter figures.

Simon Wolfson said that "things have potentially bottomed out" and that the downturn "is not as bad as we thought it was going to be".

Mr Wolfson joins a growing band of retailers which have become more optimistic about trading conditions after the worst slump for decades.

Charles Dunstone, head of Carphone Warehouse, said recently that conditions had not been as bad as he feared they would be. He said: "We really did wonder whether the whole world was just going to come to a complete halt [but] when I talk to other retailers I get the same feeling that trade has been remarkably resilient. I feel much, much more confident about the outlook for the rest of the year."

Food price inflation, which has been rising since the start of the year as farmers marked up prices to counter the weak pound, slowed in April for the first time this year, the British Retail Consortium (BRC) said today.

Food prices fell by 0.3 per cent month-on-month in April, causing the year-on-year increase to retreat to 7.9 per cent from 9.0 per cent in March and February. Consumers had the recent rise in sterling to thank for relieving the upward pressure on food prices, the BRC said.

It added that the year-on-year rise in overall prices - food and non-food - retreated from 2 per cent in March to 1.4 per cent in April. This was the result of extra price-cutting on the high street to drive Easter sales of food and non-food items and an easing of the cost to grocers of buying produce as the pound recovered some value.

Meanwhile, in a further boost to hopes that the economy could be set to turn a corner, figures from Halifax showed a slowdown in the rate at which house prices are falling.

According to the bank's house price index the price of the average UK house declined by 1.7 per cent in April - compared with a 1.9 per cent drop in March.

However, the survey showed that prices, at £154,716, remain 22.5 per cent below their August 2007 peak of £199,612. Prices were last at this level in April 2004.

The new data is the latest in a slew of more upbeat news about Britain's battered economy. Recent government figures showed that home sales jumped 40 per cent in March with 60,000 homes worth at least £40,000 each sold, compared with 43,000 homes sold in February.

Another recent Markit survey indicated that the construction industry contracted at its slowest pace in seven months in April.

Today's data comes ahead of tomorrow's Bank of England's interest rate meeting. The Bank is widely expected to keep rates on hold, at a record low of 0.5 per cent.

Paul Smith, economist at Markit, cautioned that despite the much slower rate of contraction in the service sector it was too early to say that the UK was returning to growth.

Rising unemployment and the weak housing market would continue to weigh on companies providing services to consumer, he said.

Mr Archer agreed: "The point to make is that the rate of decline may be slowing, but we are not actually in recovery yet. There is some way to go to that, I think."

He added: "The Bank of England will be reassured that inflationary pressures are waning. Consequently, it seems set to keep interest rates down at 0.5 per cent well into 2010 and it appears to have scope to extend its quantitative easing programme should it deem it appropriate to do so."

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