World Economy

UK Service Sector Slows

UK Service Sector SlowsUK Service Sector Slows

The latest Markit/CIPS service sector purchasing managers’ index in Britain fell to 55.6 last month from 57.4 in July. Although the figure remained above 50, indicating expansion, it was the weakest reading since May 2013.

Markit estimated the UK economy would grow by 0.5% in the third quarter of 2015, down from growth of 0.7% in the previous three months, Consultant News reported.

Earlier this week, a survey of the manufacturing sector also found growth slowing, although the construction sector recorded a slight pick-up in activity.

“Even after allowing for usual seasonal influences, August saw an unexpectedly sharp slowing in the pace of economic growth,” said Chris Williamson, chief economist at Markit. “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.”

The Markit survey said the slowdown in the sector was mainly due to the slowest increase in new business since April 2013.

Employment growth picked up from July, but it was still the second weakest reading since March 2014.

The survey found little evidence of price pressures in the sector, and Williamson said this “suggests the inflation outlook is benign and is therefore likely to help tip the argument towards postponing any rate hikes until the wider global economic picture becomes clearer”.

The data comes a week before the latest meeting of the Bank of England’s Monetary Policy Committee, which sets UK interest rates.

UK CPI inflation was 0.1% in July and looks unlikely to rise in the foreseeable future, which has led some economists to push back their expectations for a rate rise to the middle of next year.