Growth slows in UK services sector

Growth in the UK services sector slowed today as businesses warned of a worrying lack of consumer demand before the key Christmas trading period.

Growth in the UK services sector slowed today as businesses warned of a worrying lack of consumer demand before the key Christmas trading period.

The sector made job losses for the second month in a row, casting doubt on its ability to compensate for cuts in the public sector.

The latest Markit/CIPS Purchasing Managers’ Index (PMI) survey – where a reading above 50 indicates growth – showed that the services sector registered a slight decline from 53.2 in October to 53 in November.

Although the sector has now grown for 19 months in a row, the rate of growth has slowed in recent months after it had been above 55 for consecutive months in the middle of the year.

David Noble, chief executive at the CIPS, said: “Forward looking indicators are already showing signs of instability, with purchasing managers reporting weak consumer demand. This is worrying as we would expect demand to be higher during the Christmas period.”

New business increased to its strongest level since June but was described as lacklustre and still well below pre-recession levels.

There were reports that clients – particularly among consumers and the public sector – were hesitant to commit to new contracts given ongoing economic uncertainties and worries over public sector spending cuts.

Expectations for the future improved slightly but were well down on the levels of optimism in the summer.

Following the release of the sluggish growth figures, economists warned the services sector was expected to make a reduced contribution to economic growth in the fourth quarter of the year.

Paul Smith, senior economist at survey compilers Markit, said: “The sector’s present growth profile suggests it is unlikely to generate any meaningful job creation and help to offset expected employment cuts in the public sector.

“This is hardly unexpected – the service sector is naturally more exposed to internal UK demand, which continues to face severe headwinds.”

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