Dominant services slowdown is a warning signal for the UK | City & Business | Finance

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The dominant service sector has been at its slowest pace for 11 months in August

New-order volumes among industries that make up more than three quarters of Britain’s output were held back as heightened uncertainty over business prospects led to customers putting off spending decisions.

The slowdown was most evident in consumer-facing sectors such as hotels and restaurants, gyms, cinemas and hairdressers as the outstripping of wage growth by inflation puts a tighter squeeze on household budgets.

The IHS Markit/CIPS services purchasing managers’ index fell from 53.8 in July to 53.2 – economists had forecast 53.5.

This was above the 50-point mark, denoting growth.

But, combined with disappointing PMI construction data, it puts the economy on course to grow at 0.3 per cent in the third quarter, despite an improved manufacturing performance.

Chris Williamson, chief business economist at IHS Markit, said: “Momentum is being lost. The economy may be rebalancing towards goods production, aided by the weaker pound, but slowdowns in services and construction send warning signals about the health of the economy.

“The overall level of optimism also remained subdued, close to levels that have previously been indicative of the economy stalling or even contracting.” 

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Consumer-facing sectors such as hotels and restaurants were the most evident of a slowdown

Dr Howard Archer, EY ITEM Club chief economic adviser, said the data pointed to “lacklustre” services activity: “The purchasing managers’ surveys point to an economy still struggling to get out of low gear, as activity is hampered by squeezed consumers and economic, political and Brexit uncertainties.”

Meanwhile, new car sales fell for the fifth straight month in August – down by 6.4 per cent on the previous year to 76,433 – according to the Society of Motor Manufacturers and Traders. Sales for the first eight months of the year are down by 2.4 per cent to 1.64 million.

SMMT chief executive Mike Hawes said August was typically a quiet month as businesses and private motorists hold back for the new number plate in September.

The dominant services sector grew at its slowest pace for 11 months in August, sending a “warning signal” over the health of the UK economy. 

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Outstripping wage growth by inflation has put a tighter squeeze on household budgets

New-order volumes among industries that make up more than three quarters of Britain’s output were held…

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