Growth in the UK’s service sector has slowed to its lowest rate in over two years, according to new survey data, sparking concerns over the health of the economy.
Markit’s purchasing managers’ index fell to a 27-month low of 55.6 in August, nearer to the 50 level which indicates flat activity, according to figures released this morning. The service sector makes up roughly 80 per cent of the UK economy.
Markit’s chief economist Chris Williamson said it was “well below even the most pessimistic of economists’ forecasts”, and that combined with a weak survey of the manufacturing sector, growth may slow to 0.5 per cent in three months to September. It would compare with growth of 0.7 per cent from April to June.
“Our best guess is that with sterling having fallen of late, equities regaining some poise and a boost to real incomes from the lower oil price, the services and composite PMIs may stage a partial recovery in the next couple of months,” added economist Dominic Bryant from investment bank BNP Paribas.
While Bryant predicts the economy will expand by 0.5-0.6 per cent from July to September, he sees the glass as half full, noting the growth would be “above trend for the UK”.
Some analysts played down this month’s figure. “We would be wary about attaching too much importance into the survey, influential though the purchasing managers’ surveys are.It is worth noting that other latest survey evidence on the services sector is healthy,” said Howard Archer from analysts IHS.
The Confederation of British Industry recently ramped up its growth forecast of the UK economy for this year with its survey of the service sector showing healthy growth.