Growth in service sector slows

The Markit/CIPS headline services PMI index eased to 54.3 in April from 57.1 in March, staying in positive territory for a fourth straight month, but undershooting the 55.7 forecast.

The survey, taken with downbeat manufacturing and construction data earlier this week, suggests GDP growth is running at a quarterly rate of just 0.4 per cent, according to Markit’s chief economist Chris Williamson.

That is lower than the 0.5 per cent first quarter growth rate which was recorded after a shock contraction in late 2010.

Peter Dixon, an economist at Commerzbank, said: “At the start of the second quarter, the economy appears to have lost momentum.

“In terms of what it means for policy, a rate hike before the summer would appear to be out of the question.”

PMI surveys this week showed manufacturing grew at its slowest pace in seven months in April and construction also eased after two strong months.

Signs of slowing growth could be worrying for the coalition Government, which has staked its reputation on eliminating the budget deficit by the time of the next election in 2015.

“The service sector suffered a sharp loss of growth momentum at the start of the second quarter,” Markit’s Mr Williamson said yesterday.

“The deterioration in the sector’s performance can be largely linked to Government spending cuts.”