UK Service Sector Slowdown Could Halve Growth

The pace of Britain’s recovery is expected to almost halve by the end of the year after a survey showed the services sector expanded at the slowest pace for almost 18 months in October.

In the first quarter of the year, the UK registered a rise in GDP of 0.9%, but analysts said the slowdown since the summer meant the final quarter was likely to see growth fall to 0.5%, taking more pressure off the Bank of England to raise interest rates.

Echoing similar trends in manufacturing and construction, the Markit/CIPS Services purchasing managers’ index (PMI) fell from 58.7 in September to 56.2, the lowest level of expansion since April 2013.

Nevertheless, Britain’s rate of growth continues to outstrip the eurozone, with businesses reporting that they intend to hire more staff.

 
Robert Wood, chief UK economist at Berenberg bank, said the latest figures revealed that growth rates had returned to “more reasonable levels” and showed that Britain would continue to grow strongly.

“Keep some perspective, the PMI is still strong and the sharp slowdown may be a flash in the pan. New business flows remain very strong and firms are sufficiently enamoured with the UK’s prospects that they are still hiring strongly,” he said.

Markit said new business growth was the main prop to higher levels of activity.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza