GROWTH of the UK's dominant services sector slowed sharply last month according to a key survey, which adds to evidence that the economy has made a poor start to the second quarter.
The survey, published yesterday by the Chartered Institute of Purchasing and Supply (CIPS), will add to worries about the prospects for a UK economy which tumbled back into recession in the opening three months of this year with a second consecutive quarter of contraction.
CIPS' headline business activity index for services fell from 55.3 in March to 53.3 in April on a seasonally-adjusted basis. Although this remained above the level of 50 which is calculated by CIPS to separate expansion from contraction, this fall in the index signalled a significant deceleration in service sector growth.
The index reading for April was weaker than the figure of 54.2 which had been forecast by the City, and signalled the weakest growth in the services sector since last November.
And CIPS' surveys of the services sector have in recent times painted a significantly brighter picture of performance than official data from the Office for National Statistics.
The ONS said last week that the UK services sector had grown by just 0.1% in the first quarter, as overall gross domestic product fell by 0.2%.
Construction sector output fell by 3% in the opening quarter of this year, the ONS calculated, while manufacturing output dipped by 0.1%.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said of yesterday's survey from CIPS: "While the service sector does appear to be clearly growing, its upside is likely to be limited by still difficult conditions in the private sector and cutbacks in government spending."
The services survey followed CIPS' latest report earlier this week on UK manufacturing, which showed a sharp slowing of growth in this sector on its measure between March and April.
This heaped further doubt on Chancellor George Osborne's vision, offered in his March 2011 Budget, of "a Britain carried aloft by the march of the makers".
Martin Beck, UK economist at consultancy Capital Economics, said CIPS' report on services "echoed the other surveys released this week in suggesting that the second quarter has got off to a soft start".
Mr Beck highlighted the fact that CIPS' services survey did not include the retail sector, which had shown signs of weakening in April.
Meanwhile, a report published today by the independent National Institute of Economic and Social Research (NIESR) think-tank calls the UK economy's persistent weakness "unprecedented".
The NIESR highlights the fact that, more than four years after the start of the 2008/09 recession, economic output "is well over 4% below its pre-crisis peak".
The think-tank highlights its expectation that the UK unemployment rate, on the International Labour Organisation (ILO) measure, will rise to nearly 9% at the end of the year. It warns that "elevated" unemployment "will do permanent damage to the UK's productive capacity".
Data published last month by the Office for National Statistics showed that ILO unemployment stood at 2.65 million – a rate of 8.3% – in the December 2011 to February 2012 period.
CIPS' services survey, which is undertaken by financial information company Markit, did have some brighter points.
It signalled continuing growth in new orders in the services sector, although CIPS noted anecdotal evidence implied companies continued to work hard to secure business, with clients reluctant to spend.
The survey also pointed to a modest acceleration of the pace of increase in employment at services companies between March and April.
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