Service sector growth slows down

Published: Wednesday 5th November 2014 by The News Editor

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Growth in the UK’s dominant services sector slowed sharply in October after a month dominated by jitters over global economic prospects.

The Markit/CIPS services purchasing managers’ index (PMI) stood at a lower-than-forecast 56.2, compared to 58.7 in September and the lowest reading since May last year. A reading above 50 denotes growth.

The sector, which represents three-quarters of UK economic output, adds to recent signs of a slowdown in the UK economy after PMI data this week highlighted weaker performances in construction and manufacturing.

The Bank of England will pay close attention to these surveys when it meets tomorrow to decide whether to start raising interest rates from the 0.5% low.

Markit chief economist Chris Williamson said the slower services sector growth “knocks the prospect of interest rate hikes firmly on the head”.

He pointed out that the increasingly downbeat flow of economic data in recent weeks has thrown a cloud of uncertainty over the UK outlook.

Mr Williamson said: “The surveys suggest that the Bank will wait to gauge the full extent of the slowdown before making any decisions on policy.”

Official data this month showed the UK economy expanded by 0.7% between July and September, following growth of 0.9% in the previous quarter. Last month the Bank said it expected fourth-quarter growth of 0.8%.

Mr Williamson said a weakened eurozone, a slowdown in emerging markets and tensions in the Middle East and Ukraine pointed to the UK economy growing at 0.5% in the final quarter when based on the CIPS survey results.

Economists are also concerned about the long-term nature of the UK economic recovery as inflation, at 1.2%, outpaces wage growth at 0.7%.

Published: Wednesday 5th November 2014 by The News Editor

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