UK services sector growth slows

| July 5, 2010 | 0 Comments

Growth in the UK’s closely-watched service sector slowed in June and hit its lowest level in 10 months.

The latest index from the Chartered Institute of Purchasing and Supply (CIPS)/Markit PMI showed a reading of 54.4 in June, down from 55.4 in May.

Not only did this represent the lowest level since August last year, it was also weaker than forecasts of a reading of 55.0.

However, any reading above the crucial 50 level indicates growth.

Following the figures, the pound dipped to $1.5160 against the US dollar, compared to $1.5170 prior to the release of the figures.

Commenting on the figures, Paul Smith, senior economist at Markit, believes they point to a slowdown in economic growth for the latter half of the year.

“While we continue to look for a 0.4 percent to 0.5 percent rise in GDP for Q2, this may well already represent a peaking in the recovery cycle,” said Mr Smith.

The UK’s service sector accounts for almost three quarters of GDP and covers businesses offering hospitality such as hotels, restaurants and catering.

The figures come just a few days after the CIPS/Markit manufacturing purchasing managers’ index (PMI) revealed UK manufacturing activity slowed from its 15-year high in June.

The closely-watched CIPS/Markit manufacturing PMI dipped from 58 in May to 57.5 in June.

Meanwhile, in related news, the Office for National Statistics (ONS) was due to publish its third and final estimate of the UK’s first quarter GDP figures last week, but due to a “potential error”, the data will be delayed.

According to the ONS, the unusual move was caused by concerns over the reliability of some of the data.

Gross Domestic Product (GDP), a key measure of economic growth, is closely watched by economists as an indication of the health of the economy.

The ONS will now publish its third and final estimate of first quarter economic growth on July 12.

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