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UK service sector growth slows in August UK service sector growth slows in August
(about 2 hours later)
The engine of Britain’s economic growth slipped a gear in August after theservices sector expanded at its slowest rate for two years. The engine of Britain’s economic growth slipped a gear in August after the services sector expanded at its slowest rate for two years.
In another sign that the UK economy is losing momentum, theMarkit/Cipssurvey of the services sector, which generates more thanthree quarters of the nation’s income, found a broad slackening inactivity and a decline in the confidence of businesses in the outlookfor the rest of the year. In another sign that the UK economy is losing momentum, the Markit/Cips survey of the services sector, which generates more than three-quarters of Britain’s income, found a broad slackening in activity and a decline in the confidence of businesses in the outlook for the rest of the year.
Coming quickly on the heels of gloomy manufacturing figures, thelatest health check of the services industry was worse than analystshad expected. Coming quickly on the heels of gloomy manufacturing figures, the latest health check of the services industry was worse than analysts had expected.
The Markit/Cips purchasing managers’ index (PMI) of services activitydropped to a 27-month low of 55.6 from 57.4 in July. Readings above 50signal growth in activity compared with the previous month, and below50 contraction. The Markit/Cips purchasing managers’ index (PMI) of services activity dropped to a 27-month low of 55.6 from 57.4 in July. Readings above 50 signal growth in activity compared with the previous month, and below 50 contraction.
The consultancy Capital Economics said the slowdown was likely to be ablip before momentum picked up again in the autumn as falling oilprices lifted household disposable incomes and eased price pressureson businesses. The consultancy Capital Economics said the slowdown was likely to be a blip before momentum picked up again in the autumn as falling oil prices lifted household disposable incomes and eased price pressures on businesses.
But the fall in confidence was blamed by some analysts on the turmoilin world markets and the protracted slowdown in China, which hasbecome a major export market for advertisers and other services firms.Without China as the motor for global trade, some economists fear theUK’s recovery will falter. But the fall in confidence was blamed by some analysts on the turmoil in world markets and the protracted slowdown in China, which has become a major export market for advertisers and other services firms. Without China as the motor for global trade, some economists fear the UK’s recovery will falter.
Chris Williamson, chief economist at the financial data providerMarkit, said that even after allowing for usual seasonal influences,August saw an unexpectedly sharp slowing in the pace of economicgrowth. Chris Williamson, chief economist at the financial data provider Markit, said even after allowing for usual seasonal influences, August saw an unexpectedly sharp slowing in the pace of economic growth.
“The services PMI came in well below even the most pessimistic ofeconomists’ forecasts and follows disappointing news of a stagnationin the manufacturing sector earlier in the week. “The services PMI came in well below even the most pessimistic of economists’ forecasts and follows disappointing news of a stagnation in the manufacturing sector earlier in the week. Although construction industry growth remained resilient, the three PMI surveys collectively are pointing to the weakest monthly expansion since May 2013,” he said.
“Although construction industry growth remained resilient, the threePMI surveys collectively are pointing to the weakest monthly expansionsince May 2013,” he said. Williamson said that a slower pace of expansion across the economy would take the pressure off the Bank of England to raise interest rates in the near future.
Williamson said that a slower pace of expansion across the economywould take the pressure off the Bank of England to raise interestrates in the near future. Threadneedle Street has signalled that it is ready to beginning raising rates for the first time since 2007 next February, a move many economists now believe will be delayed until at least the summer of 2016.
Threadneedle Street has signalled that it is ready to beginningraising rates for the first time since 2007 next February, a move manyeconomists now believe will be delayed until at least the summer of2016.