Slowdown for service sector

This Is Money13 April 2012

GROWTH in Britain's service sector is at its slowest since February and business confidence has dropped to its lowest since the Iraq war two years ago, according to a survey. The news increased the chances of a cut in the UK base rate before the year-end.

The Chartered Institute of Purchasing and Supply/NTC Research's index of service sector activity slipped to 55.1 points last month -- well below the 56 forecast by analysts and its lowest in three months -- from 56.5 in April.

A reading of 50 or above indicates expansion, while 50 and below signals a shrinking service sector, which includes non-manufacturing industries.

The figures followed data earlier this week which showed a faster-than-expected contraction in Britain's manufacturing sector.

Economists said the figures still suggested a relatively robust pace of services sector growth, but continuing decline would put pressure on the Bank of England to cut interest rates from 4.75%by year-end.

'This is important for monetary policy makers and all adds up to an interest rate cut before the end of the year, I think,' said Alan Clarke, UK economist at BNP Paribas.

Confidence for the future dipped to 71.5 from 71.8 in April, its lowest since the start of the Iraq war in March 2003 and well below the readings above 80 at the start of 2004.

'There was some concern amongst the survey panel over the recent slowdown of growth in the UK and global economies,' the report said.

See the latest economic figures on the UK economy at www.thisismoney.co.uk/economy

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