UK service sector growth slows

Growth in the dominant service sector slowed sharply in February after January's weather-related bounce and companies recorded job losses for the fifth month running, a survey showed.

February's headline services PMI index fell to 52.6 from January's eight-month high of 54.5, a peak that followed a negative reading in December blamed on snow. The index, compiled by Markit/CIPS, had been expected to fall to 53.5.

Although the pace of growth eased in February, it remained close to the average for the second half of 2010 and will reinforce expectations the economy will recover early this year, but only slowly.

The surprise 0.6 per cent contraction in the fourth quarter of last year has made the Bank of England wary of raising interest rates, despite a surge in inflation to double the central bank's target.

Investors are betting the Bank will raise interest rates from their low of 0.5 per cent by the middle of the year, although much will depend on how the economic data develops.

"February saw growth of the UK service sector return to the modest rate seen prior to the weather-related readings of December and January, leaving it on course to expand by around 0.3 per cent in quarter one," said Paul Smith, senior economist at Markit.