Services slowdown adds to UK recovery fears

Fears that the UK’s economic recovery is already starting to slow have been exacerbated by data showing activity eased in the service sector last month.

The Markit/Chartered Institute of Purchasing & Supply UK services purchasing managers’ index (PMI) fell from 56 points in January to 53.8 in February. This indicates that the service sector is still growing although the pace of expansion has slowed.

Chris Williamson, chief economist at financial information provider Markit, says: “Despite seeing some loss of momentum in February, the service sector continued to grow at a robust pace, adding to signs that a double-dip recession will be avoided.”

However, Williamson says the rate of job creation in the service sector remains “disappointingly weak”, while the need for firms to discount prices to secure new business demonstrates how tough the operating environment is.

Vicky Redwood, chief UK economist at Capital Economics, says the services PMI is further evidence that “the recent pick-up in the economic recovery is already starting to lose momentum”.

Howard Archer, chief UK and European economist at IHS Global Insight, adds: “The services survey supports the view that, while the UK will avoid recession, it still has its work cut out to develop sustainable decent growth.”