Fears for the health of the economy were fuelled yesterday as a survey revealed growth in the powerhouse services sector slowed to a near two-year low last month.
The Markit/CIPS purchasing managers’ index (PMI) for services activity, in which a reading above 50 represents growth, came in at 50.6 in September, down from 52.2 the previous month.
The slowdown was driven by weaker new orders, meaning that incoming new business was insufficient to compensate for the completion of existing projects.
The Bank of England’s decision this week to increase or hold quantitative easing will be a close call as the strong GDP data showing 1 per cent growth in the third quarter is offset by the weak services report, as well as poor manufacturing and construction surveys.
Andrew Harker, economist at survey compilers Markit, said: “The latest UK services PMI data provide a warning to those who saw the strong growth in GDP during the third quarter as symbolising the start of a strong and speedy economic recovery.”
The services sector, which makes up around 75 per cent of the total economy, was the driving force behind the better-than-expected growth in the third quarter, as it rose 1.3 per cent, following a 0.1 per cent drop in the previous quarter.
Despite the strong headline growth, economists warned the underlying picture was much weaker.