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UK service sector growth slows in August

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, the
Markit/Cipssurvey of the services sector, which generates more than
three quarters of the nation’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, the
latest health check of the services industry was worse than analysts
had expected.

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 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 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 provider
Markit, said that even after allowing for usual seasonal influences,
August saw an unexpectedly sharp slowing in the pace of economic

“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.

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“Although construction industry growth remained resilient, the three
PMI surveys collectively are pointing to the weakest monthly expansion
since 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.

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


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