Business

UK services growth slows to 17-month low in October

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UK services growth slowed to a 17-month low in October after fears over the strength of the economy hit confidence.

The purchasing managers' index from Markit/CIPS fell by more than expected to 56.2 from 58.7 in September.

A figure above 50 still indicates expansion, but Markit chief economist Chris Williamson said the slowdown eased pressure to raise interest rates.

"[It] knocks the prospect of interest rate hikes firmly on the head," he said.

The closely-watched survey follows separate PMI surveys for October showing growth in UK construction has slipped to a five-month low, while growth in the manufacturing sector was also slower than the same month last year.

Markit's composite PMI, a broader gauge of the economy that combines services, manufacturing and construction industries, fell to 56.4 from 58.1, its lowest level since June 2013.

Mr Williamson said the latest surveys added to "an increasingly downbeat flow of economic data" which had "thrown a cloud of uncertainty over the outlook".

"The surveys therefore suggest that the Bank of England will wait to gauge the full extent of the slowdown before making any decisions on policy," he added.

Pound falls

The Bank of England will announce its latest decision on interest rates on Thursday.

It is expected to keep rates at their current record low of 0.5%, and most economists expect them to stay at this level until the middle of next year.

The pound fell to a one-year low against the dollar after the survey was released, down 0.7% at $1.5895.

"The picture is by no means weak, but it is weaker. The drop in the service and construction sector PMIs this week is consistent with our view that UK growth will slow a little over the next few quarters," said UBS economist David Tinsley.

"For the Monetary Policy Committee meeting this week, this data is another reason for some caution," he added.

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