FURTHER doubt has been cast on the UK's ability to recover from a sharp slowdown in growth at the start of this year by a sharp deceleration in expansion in the key services sector.
A survey published yesterday by the Chartered Institute of Procurement & Supply (CIPS) showed that growth in the services sector slowed to its weakest pace in five months in May.
Howard Archer, chief UK economist at consultancy IHS Global Insight, declared that the weaker services growth "puts a dent into hopes that GDP (gross domestic product) growth will pick up markedly in the second quarter".
Official figures have shown that UK growth slowed to just 0.3 per cent in the opening three months of this year, from an already below-trend pace of 0.6 per cent in the final quarter of 2014.
CIPS's headline business activity index for services fell from 59.5 in April to 56.5 in May on a seasonally-adjusted basis. The May reading was worse than expected, with economists having forecast the services business activity index would come in at 59.2.
While above the level of 50 deemed to separate expansion from contraction, the May reading signalled the weakest pace of growth since December.
The survey also showed a slowdown in growth of new business for services sector companies.
Meanwhile, the composite output index from CIPS's surveys of the UK services, manufacturing, and construction sectors fell to 55.8 in May, the lowest since December, from 58 in April.
Chris Williamson, chief economist at CIPS survey compiler Markit, said: "A marked slowing in the rate of growth signalled by the UK PMI (purchasing managers' index) surveys raises doubts about the ability of the economy to rebound from the weakness seen at the start of the year, killing off the chances of any imminent hiking of interest rates by the Bank of England.
"However, the survey data also point to an upturn in inflationary pressures, which should alleviate worries about deflation becoming entrenched, though suggests that the return of rising prices could stymie consumer spending later this year."
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