UK service sector activity in surprise contraction in December

| January 6, 2011 | 0 Comments

Growth in the UK’s closely-watched service sector contracted in December - suggesting a sharp slowdown in economic growth in the final quarter of 2010.

The Chartered Institute of Purchasing and Supply (CIPS)/Markit purchasing managers’ index (PMI) fell to 49.7 in December, down from the reading of 53.0 in November.

Not only did the sector endure its first fall in activity since April 2009, it was far lower than analysts expectations of a flat reading of 53.

The latest figures mean the index is now below the crucial 50 level, which separates growth from contraction.

However, the drop was attributed to the bad weather during the month.

Commenting on the index, Markit chief economist Chris Williamson, said: “A very disappointing end to the year in the service sector matches a similar deterioration in the construction sector.”

The survey covers businesses making up around 40% of the economy, but does not include retailers or the public sector.

The figures come shortly after the CIPS/Markit PMI index revealed construction activity also contracted in December.

The PMI slumped to 49.1 in December, from 51.8 in November – the first fall since February last year and surprised analysts.

Again, the index is below the crucial 50 level, which separates growth from contraction.

Meanwhile, UK manufacturing activity surged at a record pace in December.

The closely-watched CIPS/Markit manufacturing PMI rose to 58.3 in December from November’s revised reading of 57.5.

Not only was the reading the highest since September 1994, it confounded analysts expectations of a reading of 57.

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