Markit/CIPS index of service sector activity shows fall in May

Growth in the service sector fell in May

Service sector grows for 16th consecutive month

Britain’s services sector activity grew at a slower rate than expected in April, dropping to the lowest level since November, according to new figures.
Growth in UK services reduces double-dip recession likelihood

The UK's services sector saw continued growth in February, though at a lower pace than January. The results lessen the possibility that the UK will slip back into recession.

Friday, 03 June 2011 11:13

Growth in the serice sector in the UK fell slightly in May adding to other economic announcements this week that indicate the economic recovery is moving very slowly.

The Markit/Chartered Institute of Purchasing and Supply (CIPS) Business Activity Index revealed that activity in the UK service sector fell to 53.8, down from 54.3 in April. A figure above 50 indicates that the sector is expanding. The level of 53.8 represents a three-month low.

The Markit/CIPS report showed that larger companies are performong better than smaller or medium-sized companies but that weak consumer demand and higher costs are having a negative effect on the industry.

Earlier in the week the PMI index for manufacturing also fell to a 20-month low. Together, the manufacturing and services sector make up 90 per cent of the UK economy, so a fall in growth in both sectors is extremely significant and gives a clue towards the second quarter's GDP figures, revealing that GDP growth could be non-existant or very low.

The UK economy fell by 0.5 per cent in the final quarter of 2010 and then grew by the same amount in the first quarter of 2011 to be effectively flat over the six month period.

CIPS chief executive, David Noble said: "“Combined with the weaker trend in manufacturing highlighted earlier this week, PMI survey data presently point to a soft GDP reading for the second quarter."

Howard Archer, Chief UK & European Economist for IHS Global Insight said: "Not only did the services business activity index retreat again in May, but a moderation in incoming new business growth and a second successive contraction in outstanding business is likely to weigh down on activity in the near term at least. On a more positive note, business expectations in the sector improved in May, while there was a marginal increase in employment."

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Markit/CIPS index of service sector activity shows fall in May

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