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Services growth faster but confidence falls

GROWTH of the UK's dominant services sector accelerated in August to its fastest pace since last October but confidence among companies fell to a 15-month low, a survey has shown.

The fall in confidence in the Chartered Institute of Purchasing and Supply's (CIPS's) latest survey of the sector, published yesterday, was attributed to concern among some services companies about the underlying strength of their business pipelines.

CIPS's business activity index for services rose from 59.1 in July to 60.5 in August on a seasonally-adjusted basis, moving further above the level of 50 which separates expansion from contraction to signal the fastest growth in 10 months.

The survey covers transport and communication, financial intermediation, business services, personal services, computing and information technology, and hotels and restaurants. It does not cover retail.

Faster services growth contrasted with a sharp and unexpected slowdown in expansion of UK manufacturing activity in August to the weakest pace for 14 months, revealed in a survey from CIPS on Monday.

CIPS's manufacturing survey exacerbated worries about the UK economic recovery's lack of balance, with experts worried about a continuing over-reliance on debt-laden consumers who appear to have been given a lift by rising housing prices.

A survey from CIPS on Tuesday showed construction sector growth accelerated in August to its fastest pace since January, as housebuilding activity continued to surge and expansion of the civil engineering sub-sector quickened.

CIPS's services survey showed confidence among companies about the prospects of their business activity being higher in 12 months' time eased to its weakest for 15 months. The pace of growth of services companies' new orders eased between July and August to a three-month low. Employment growth in the services sector also slowed, to its weakest pace since March.

Chris Williamson, chief economist at survey compiler Markit, said: "An acceleration of growth in the vast services sector and an ongoing construction boom offset a weakened performance in manufacturing in August.

"The three PMI surveys indicate that the economy grew at the fastest rate since last November, providing further ammunition for policy-makers arguing for higher interest rates. The worry is that growth remains too dependent on the domestic economy, raising the risk that higher interest rates will derail the upturn."

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