The U.K. dominant service sector grew at a slower-than-expected pace in April, raising further questions about the underlying strength of the British economy.
IHS Markit said its Purchasing Managers Index for the industry saw only a modest rebound from the 20-month low in March, with the reading of 52.8 the second weakest since September 2016. Based on the three industry surveys for April, Markit estimates an expansion consistent with a quarterly growth rate of a “disappointingly subdued” 0.25 percent.
While that would be an improvement on the 0.1 percent seen in the first quarter, when snow and storms hampered activity, it’s considerably slower than the pace of growth seen in the second half of 2017. Markit said consumers showed a subdued willingness to open their wallets in April, while concerns about the domestic outlook crimped spending by companies.
The report adds to signs that the Bank of England’s Monetary Policy Committee, which raised interest-rates for the first time in a decade last year, will refrain from a follow-up increase when they meet next week. Such a move was seen as a near certainty by investors until a few weeks ago, but those bets were reversed after a raft of poor data.
The pound pared an advance against the dollar after the release, while U.K. government bonds erased earlier losses.
Markit’s services index was slightly higher than the 51.7 recorded in March but below the 53.5 seen by economists in a Bloomberg News survey. The firm said that the rate of service- sector employment growth slowed to its weakest since March 2017 last month, and higher salary payments push up costs.
The figures follow reports earlier this week showing an index for the manufacturing industry fell to a 17-month low last month and the construction sector rebounded.
Source : Bloomberg