The services purchasing managers’ index – a survey of firms – fell to 56.2 in October from 58.7 in September, according to figures released by Markit yesterday. A score above 50 signifies growth. October’s 56.2 denotes strong growth but is part of a worrying downward trend.
Services contribute around 78 per cent of the UK’s GDP, according to official statistics, so any slowdown in the sector is alarming.
“These results are likely to strengthen the conviction of the doves that this is no time to think about raising interest rates,” said Martin Beck, senior economic adviser to the EY Item Club, a group of economists.
Most sub-sections of the survey registered slowdowns. Business confidence and new business growth both dipped, with the latter falling to a five-month low. However, firms reported strong hiring figures, with the data showing the sharpest rise in employment for three months.
“The survey also contains some ammunition for the hawks, with evidence of escalating wage pressures forcing up input costs. This suggests that the MPC [monetary policy committee] is likely to remain split into two distinct camps for the foreseeable future,” said Beck.