(RTTNews) - U.K.'s service sector growth slumped in August on weaker trend in new business and general economic uncertainty, data from Markit Economics showed Monday. Given the dominant role of the service sector in the overall economy, the notable slowdown sparks concern over the future prospects.
The headline Markit/Chartered Institute of Purchasing & Supply Purchasing Managers' Index fell to a seasonally adjusted 51.1 from 55.4 in July. Still, the above-neutral reading indicates expansion in the service sector. The decline in the index was greater than those seen in the autumn of 2008 following the collapse of Lehman Brothers and was surpassed only by the foot-and-mouth disease related fall of April 2001. Among other factors, the rioting and public disorder in some areas of the country in early August adversely affected activity.
Although at the slowest pace since February, incoming new orders continued to grow in August. Weighed down by worries over the impact of government spending cuts, business confidence was the lowest for a year.
A further decline in service sector employment was logged in August with underlying trends in activity and new business weakening.
Input price inflation remained elevated in August, though it continued to weaken. Competitive pressures and the need to offer discounts to support growth undermined service providers' ability to pass on higher costs.
"With a number of businesses, particularly those in the South East, hopeful about the impact of the 2012 Olympics, there are perhaps better times to look forward to," said David Noble, chief executive officer at CIPS said.
The British Chambers of Commerce downgraded economic growth for 2011 to 1.1 percent from 1.3 percent, citing the impact from worsening global prospects. The U.K. economy expanded only 0.2 percent in the second quarter.
IHS Global Insight's economist Howard Archer said any technical bounce back in growth in the third quarter looks increasingly likely to have been countered by a clear softening in the economy's underlying performance.
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