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UK growth slows, but remains above trend

09/01/15

The UK services sector continues to grow, but not as fast as before.

The latest Markit/CIPS Purchasing Managers Index (PMI) may be said to constitute the classic dilemma of interpretation; is the glass half full, or half empty?

Its services sector reading for December was 55.6 per cent, which represented a significant fall from November's reading of 58.6 per cent. Indeed, it was the lowest reading in 19 months and growth was at a 20-month low.

All that may seem like bad news. However, the other side of the coin is that the sector has now seen two years of growth and last month's reading is still higher than the historical average for the survey. In addition, employers remained positive and continue to add to headcounts, albeit at the weakest rate for four months.

The latter fact may be of greatest encouragement to those seeking jobs in the financial services sector, such as accountants.

Discussing the findings, chief economist at Markit Chris Williamson said the survey data provides a "mixed bag" of results and adds to the concerns economic policy makers might face, particularly as the quarterly growth rate for the economy is expected to have declined to 0.5 per cent in the last three months of 2014. He suggested this could deter the Bank of England from raising the base rate in early 2015.

However, he suggested, that is only half the story, commenting: “On the other hand, it’s too early to get worried about a sharp slowdown; after all, the latest PMI reading is still strong, merely down from unusually high levels earlier in the year and in line with the average seen in the years leading up to the financial crisis."

The slight slowdown in service sector growth was in line with the construction and manufacturing figures for December. These also revealed a decline in growth but an overall rate of expansion that was above the historic survey average.

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