The latest snapshot of the sector from the Chartered Institute of Purchasing and Supply (CIPS) - which covers everything from accountancy to hairdressing, but excludes retailing - showed the weakest growth for seven months in April. However, the Bank of England, which is widely expected to raise interest rates next week, will be encouraged by news that price pressures in the sector eased to their weakest this year.

The survey's headline business activity index registered 57.2, down from 57.6 in March and the lowest reading since September. It was, however, still well above the 50 "no change" level. While growth remained strong in the IT and business services sectors, rates of expansion were weaker in hotels and restaurants and personal services.

It appears that, while business with the corporate sector is still booming, higher inflation and interest rates are hitting consumer demand. Inflation on the Consumer Prices Index measure jumped to 3.1 per cent in March, its highest for 10 years and more than a percentage point above the BoE's 2 per cent target. Rates, meanwhile, have been raised three times since last August.

Roy Ayliffe, director of professional practice at CIPS, said: "While the services sector continues to maintain momentum, it is doing so at an increasingly slower pace. Purchasing managers' attribute this dampening in performance to the widespread effects of inflation."

The survey showed that firms faced a sharp rise in overheads last month, driven by energy and wage bills in addition to increases in office rental costs. But firms were able to pass on only part of this increase. The prices charged index slipped from 55.3 to 53.9, the weakest in four months.

Analysts said the services sector slowdown would not prevent the BoE's Monetary Policy Committee lifting rates by a quarter-point to 5.5 per cent next Thursday. However, it could suggest that further increases during the summer will not be needed.