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 in 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 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.
Britain’s rate of growth still continues to outstrip the eurozone, with businesses reporting and businesses reported 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,” he said. “New business flows remain very strong and firms are sufficiently enamoured with the UK’s prospects that they are still hiring strongly.”
Markit said new business growth was the main prop to higher levels of activity. In its monthly report, the financial data provider said: “October’s data indicated the 22nd successive monthly increase in incoming new work, and respondents commented on success in securing new work via higher marketing and improved client engagement.”
Reflecting the weaker outlook, sterling sank to a one-year low of $1.59. In July, the currency topped $1.70 but has fallen back as the prospect of interest rate rises began to wane.
Warning signs of a sharper than expected deceleration towards the end of the year was reflected in comments about the uncertainty for exports.
While the US remains a strong export market for the UK businesses, the eurozone has entered a period of contraction, with several countries falling back into a third recession since the 2008 banking crash.
Chris Williamson, chief UK economist at Markit, said the composite index for October across all the main business sectors showed the exuberant recovery of six months ago had evaporated.
“The main cause of the slowdown was a deterioration of service sector activity growth to the weakest since May of last year,” he said.
“Construction sector growth also slowed, down to a five-month low, led by a moderation in the pace of house building, and the goods-producing sector has moved down a gear compared to earlier in the year.
“While manufacturing bucked the trend in October, with output rising at the fastest rate for three months, the goods-producing sector had already seen growth weaken considerably over the summer. Despite the uptick in October, the manufacturing sector’s pace of expansion remained well below that seen earlier in the year.”
theguardian.com
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 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.
Britain’s rate of growth still continues to outstrip the eurozone, with businesses reporting and businesses reported 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,” he said. “New business flows remain very strong and firms are sufficiently enamoured with the UK’s prospects that they are still hiring strongly.”
Markit said new business growth was the main prop to higher levels of activity. In its monthly report, the financial data provider said: “October’s data indicated the 22nd successive monthly increase in incoming new work, and respondents commented on success in securing new work via higher marketing and improved client engagement.”
Reflecting the weaker outlook, sterling sank to a one-year low of $1.59. In July, the currency topped $1.70 but has fallen back as the prospect of interest rate rises began to wane.
Warning signs of a sharper than expected deceleration towards the end of the year was reflected in comments about the uncertainty for exports.
While the US remains a strong export market for the UK businesses, the eurozone has entered a period of contraction, with several countries falling back into a third recession since the 2008 banking crash.
Chris Williamson, chief UK economist at Markit, said the composite index for October across all the main business sectors showed the exuberant recovery of six months ago had evaporated.
“The main cause of the slowdown was a deterioration of service sector activity growth to the weakest since May of last year,” he said.
“Construction sector growth also slowed, down to a five-month low, led by a moderation in the pace of house building, and the goods-producing sector has moved down a gear compared to earlier in the year.
“While manufacturing bucked the trend in October, with output rising at the fastest rate for three months, the goods-producing sector had already seen growth weaken considerably over the summer. Despite the uptick in October, the manufacturing sector’s pace of expansion remained well below that seen earlier in the year.”
theguardian.com
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