Belfast Telegraph

Growth in services sector at lowest for three years

By Ben Woods

Britain's powerhouse services sector saw its weakest growth in nearly three years during February in the latest sign of a slowdown in the UK economy.

The closely-watched Markit/CIPS services purchasing managers' index (PMI) showed a reading of 52.7 last month compared to 55.6 in January - its slowest rise since March 2013. A reading above 50 signals growth.

Ulster Bank chief economist Richard Ramsey said the slowdown was likely to be experienced in Northern Ireland, where the sector - which embraces everything from restaurants to estate agents - lags behind UK trends.

Referring to March 16's spring Budget, he added: "It's also not what the Chancellor, George Osborne, wants to be hearing going into a budget as it will have an impact on tax receipts and public finances."

The Markit survey said the slowdown was triggered by slower expansion in the volume of new business, with firms seeing clients delaying placing new orders because of fears over global growth.

But the long-term outlook for the sector stepped up after January's three-year low to the joint strongest in five months, according to the study.

The report on the services sector - which accounts for three-quarters of the UK economy - will reinforce expectations that the Bank of England will keep historic low interest rates at 0.5% for at least the remainder of the year after disappointing survey readings for the manufacturing and construction industries earlier this week.

Some economists believe the slowdown in services activity may even strengthen the case for a potential rate cut.

The construction PMI survey this week showed housebuilding activity in the UK sank to its lowest level for more than two-and-a-half years in February, while Tuesday's manufacturing report revealed the sector was teetering on the brink of stagnation.

Chris Williamson, chief economist at Markit, said the services slowdown could weaken wider economic growth to 0.3% in the first quarter.

He added that "business confidence in the service sector remained at a level which has historically presaged an imminent slowing in the economy".

Belfast Telegraph