Service sector hit by ash and election

ACTIVITY in Britain’s services sector in April failed to match the storming performance seen by manufacturers, a leading survey showed yesterday.

Although output continued to expand, the Markit/CIPS services purchasing managers’ index (PMI) showed a slowdown in the pace of growth. The PMI index fell to 55.3 from 56.5 against expectations for a further rise. This was the lowest level since last September, excluding January’s weather-related dip.

However, analysts remained generally upbeat, pointing to temporary factors such as the uncertainty ahead of the election and the fallout from the volcanic ash episode.

Moreover, the employment sub-index rose to a two-year high of 51.8 from March’s 50.3, indicating that service sector firms themselves do not envisage this as the onset of a more protracted slowdown, said Richard McGuire, at RBC Capital Markets.

The PMI is now pointing towards quarterly growth of services sector output of about 0.5 per cent, while the weighted average of all three PMI surveys is consistent with quarterly GDP growth of close to its trend rate of about 0.7 per cent, said Capital Economics’ Vicky Redwood.