Service sector growth slows down

Growth in construction and manufacturing have also slowed markedly , according to the latest CIPS surveys Growth in Britain’s services sector slowed in April according to a key survey, providing fresh evidence that economic growth is weakening, as the Bank of England’s monetary policy committee prepares to set interest rates. The closely watched Chartered Institute of Purchasing and Supply’s purchasing managers’ index, produced with Markit, declined from 57.1 to 54.3 – still pointing to growth, but at a considerably slower pace than in the first three months of the year. Growth in construction and manufacturing have also slowed markedly , according to the latest CIPS surveys, released earlier in the week. “Given the dominant role of the services sector, the survey fuels concerns over the fragility of the economy and its ability to withstand the fiscal tightening that increasingly kicked in from April,” said Howard Archer, of IHS Global Insight. A sharp decline in government spending in the new fiscal year, which began in April, was one explanation for the deteriorating outlook, according to Chris Williamson, Markit’s chief economist. “There’s been a significant loss of momentum,” he said. “It’s particularly linked to government spending cuts. What companies were saying in the first quarter was that there was a surprisingly strong increase in spending from government departments, and that has gone into reverse.” The latest official figures showed that GDP had been flat – “on a plateau”, as the Office for National Statistics put it – since last autumn, even before the worst of the fiscal squeeze, and today’s survey will add to fears that the government’s austerity plans are stifling economic recovery. There was some good news in the CIPS survey – the increase in sales was the fastest since last March, and new business also rose. However, firms also said they were pushing up their prices at the fastest pace for two-and-a-half years, to try to offset rapidly rising costs. Williamson suggested that the three surveys – of manufacturing, construction and services – taken together suggested that the pace of growth in the economy may have halved between the first and the second quarters of the year. The reading is likely to be the final piece of evidence the more dovish members of the monetary policy committee needed to forestall an increase in interest rates on Thursday, from their record low of 0.5%. Services sector Economic growth (GDP) Economics Heather Stewart guardian.co.uk

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