Service sector activity falls for first time in two years

The UK service sector shrank for the first time in two years in December, data showed this morning.

The Markit/CIPS services Purchasing Managers’ Index (PMI) fell to 48.9 in December from 50.2 in November, marking its lowest reading since April 2009. The 50 level separates growth from contraction.

A fall in new business was the principal reason behind the fall in service sector activity, according to Markit.

Chris Williamson, chief economist at Markit, said today that the index's first fall in two years raises the likelihood that the UK economy is slipping back into recession.

"The fact that incoming new business dropped for a second successive month suggests that underlying demand remains very weak and that activity may continue to fall in the New Year," he added.

The service sector PMI follows yesterday’s construction sector data, which showed that activity in the sector dropped to a six-month low of 48.7 in December.

The only bright spot came from the UK manufacturing sector, as the PMI climbed to 51.4 in December, marking a 15-month high.