Britain’s services sector slowed at the end of 2014, fanning fears that the economy is losing momentum.
The biggest part of the UK economy grew at its slowest pace for 19 months in December, according to a closely watched survey. Meanwhile there were fresh signs of trouble for the eurozone economy, with equivalent surveys suggesting the single currency bloc’s private sector grew at the slowest rate in more than a year in the fourth quarter.
The headline reading for activity on the Markit/CIPS UK Services PMI suffered its biggest drop for more than three years, falling to 55.8 from 58.6 in November.
That is still well above the 50-mark that separates expansion from contraction, but below expectations in the City for a 58.5 reading.
The survey also showed new business grew at the slowest pace for more than 18 months. The report follows news of a December slowdown in the smaller construction and manufacturing sectors in other Markit surveys.
The overall picture of the economy poses a challenge for the Bank of England’s interest rate setters as they decide when to raise borrowing costs from the current record low of 0.5%, said Markit’s chief economist, Chris Williamson.
“The survey data provide policymakers with a mixed bag of news on the health of the economy at the end of last year, adding further uncertainty about the outlook for interest rates,” he said.
“Weaker rates of expansion were seen in services, manufacturing and construction in December, taking the overall pace of economic growth to the weakest for just over a year-and-a-half.
The surveys suggest the economy grew by 0.5% in the fourth quarter, and the loss of momentum towards the year end will no doubt fuel worries that the upturn is too fragile to withstand higher interest rates.”
The services sector poll, which spans industries from transport to tourism, showed activity was still relatively robust and employment rose for the 24th month in a row. The rate of hiring growth, however, slipped to a four-month low.Overall businesses were fairly upbeat, Markit said.
David Noble, group chief executive at the Chartered Institute of Purchasing & Supply (CIPS) said: “Though the index reports a slowdown this month, the recent wave of optimism has not abated amongst the panel’s respondents, half of whom believe 2015 will still be a good year.”
The UK report followed weak numbers from the eurozone. Markit’s composite PMI survey, which combines the manufacturing and services sectors, indicated the slowest rate of growth in the fourth quarter of 2014 since the third quarter of 2013.
The big-three economies of Germany, France and Italy were all weak. German output accelerated modestly at the end of the year, but at a slower pace compared with earlier in the year. Output contracted in both France and Italy.
Markit said that based on the evidence from the PMIs, the eurozone economy probably grew by just 0.1% in the fourth quarter of 2014, following growth of 0.2% in the third. Chris Williamson said: “The eurozone economy ended 2014 with its worst quarter for over a year.
The eurozone will look upon 2014 as a year in which recession was avoided by the narrowest of margins, but the weakness of the survey data suggests there’s no guarantee that a renewed downturn will not be seen in 2015.”
theguardian.com
The biggest part of the UK economy grew at its slowest pace for 19 months in December, according to a closely watched survey. Meanwhile there were fresh signs of trouble for the eurozone economy, with equivalent surveys suggesting the single currency bloc’s private sector grew at the slowest rate in more than a year in the fourth quarter.
The headline reading for activity on the Markit/CIPS UK Services PMI suffered its biggest drop for more than three years, falling to 55.8 from 58.6 in November.
That is still well above the 50-mark that separates expansion from contraction, but below expectations in the City for a 58.5 reading.
The survey also showed new business grew at the slowest pace for more than 18 months. The report follows news of a December slowdown in the smaller construction and manufacturing sectors in other Markit surveys.
The overall picture of the economy poses a challenge for the Bank of England’s interest rate setters as they decide when to raise borrowing costs from the current record low of 0.5%, said Markit’s chief economist, Chris Williamson.
“The survey data provide policymakers with a mixed bag of news on the health of the economy at the end of last year, adding further uncertainty about the outlook for interest rates,” he said.
“Weaker rates of expansion were seen in services, manufacturing and construction in December, taking the overall pace of economic growth to the weakest for just over a year-and-a-half.
The surveys suggest the economy grew by 0.5% in the fourth quarter, and the loss of momentum towards the year end will no doubt fuel worries that the upturn is too fragile to withstand higher interest rates.”
The services sector poll, which spans industries from transport to tourism, showed activity was still relatively robust and employment rose for the 24th month in a row. The rate of hiring growth, however, slipped to a four-month low.Overall businesses were fairly upbeat, Markit said.
David Noble, group chief executive at the Chartered Institute of Purchasing & Supply (CIPS) said: “Though the index reports a slowdown this month, the recent wave of optimism has not abated amongst the panel’s respondents, half of whom believe 2015 will still be a good year.”
The UK report followed weak numbers from the eurozone. Markit’s composite PMI survey, which combines the manufacturing and services sectors, indicated the slowest rate of growth in the fourth quarter of 2014 since the third quarter of 2013.
The big-three economies of Germany, France and Italy were all weak. German output accelerated modestly at the end of the year, but at a slower pace compared with earlier in the year. Output contracted in both France and Italy.
Markit said that based on the evidence from the PMIs, the eurozone economy probably grew by just 0.1% in the fourth quarter of 2014, following growth of 0.2% in the third. Chris Williamson said: “The eurozone economy ended 2014 with its worst quarter for over a year.
The eurozone will look upon 2014 as a year in which recession was avoided by the narrowest of margins, but the weakness of the survey data suggests there’s no guarantee that a renewed downturn will not be seen in 2015.”
theguardian.com
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