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Service sector growth grinds to three-month low

The UK’s services sector expanded slower last month than at any point since April, with employment growth at is weakest in almost two years, new research has found.

03 AUGUST 2018 | CHRIS SEEKINGS
"Underlying dangers" to UK economy's biggest contributor ©iStock
"Underlying dangers" to UK economy's biggest contributor ©iStock


The IHS Markit/CIPS UK Services Purchasing Managers’ Index gives the sector a score of 53.5 for July, down from 55.1 in June but still above the 50 no-change value.

The fall in growth was partly put down to the hot weather and football World Cup disrupting business operations, while Brexit uncertainty continued to delay decision-making.

Difficulties finding staff persisted amid tight labour market conditions and rising wage pressures, with the sector recording it slowest increase in new workers since August 2016.

However, some firms said this was because of long-term plans to automate business processes and maintain service levels with lower headcounts.

“This is also helping drive efforts to boost productivity across the service sector,” IHS Markit associate director, Tim Moore, commented.

The findings also show that input price inflation eased from the nine-month high recorded in June, with the increase in average prices charged weaker than the trend seen so far in 2018.

“The combination of slower output growth and softer price pressures during July will reinforce expectations that any further Bank of England rate rises will be both gradual and limited,” More added.

Backlogs of work only increased marginally, with anecdotal evidence suggesting efforts to improve productivity helped limit pressures on operating capacities.

CIPS group director, Duncan Brock, said that consumer and client confidence remains “persistently half-hearted”, signally pessimism around the performance of the economy.

“Levels of new orders and jobs growth were affected along with business optimism, which remained below the long-term average,” he continued.

“The sector appears to be bumping along a seesaw path with ups and downs, but no one can hide the underlying dangers that still remain in the biggest contributor to the UK economy.”


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