FEARS over the weakness of the UK economy are mounting after the revelation that UK services sector growth remained subdued last month, accelerating only slightly following a dramatic slowdown in snow-hit March.
And employment growth in the services sector slowed further last month, to its weakest pace since March 2017, according to the latest survey from the Chartered Institute of Procurement & Supply.
Chris Williamson, chief business economist at CIPS survey compiler IHS Markit, noted CIPS’s surveys of April activity in the services, manufacturing and construction sectors together pointed to the third-weakest monthly UK economic expansion since the immediate fall-out from the Brexit vote in summer 2016.
He highlighted the fact that the latest all-sector output index, at 53.2, was “historically consistent with the economy growing at a quarterly rate of around 0.2 per cent at the start of the second quarter”.
The all-sector output index had plunged from 54.2 in February to 51.9 in March, amid disruption from the so-called “Beast from the East” weather system.
Mr Williamson said the fact that it had last month failed to recover the ground lost in March underscored “how the economy has slowed since late last year”.
He added: “While anecdotal evidence collected from surveyed companies indicated that the weak PMI (purchasing managers’ index) numbers in March were in part attributable to business being disrupted by heavy snowfall, no such adverse factors were reported in April.
“The surveys have instead indicated that sales, investment and hiring are being hit by uncertainty about the economic outlook as well as sluggish domestic demand, notably among consumers.”
CIPS’s business activity index for the UK services sector edged up from 51.7 in March to 52.8 last month on a seasonally adjusted basis, having tumbled from 54.5 in February.
The April reading signalled the second-slowest monthly pace of services sector growth since September 2016.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said: “It is notable that the April services PMI reading of 52.8 was below the average level of 53.1 achieved in the first quarter of 2018, which had been down from 54.5 seen in the fourth quarter of 2017. It was also clearly below the 2017 average of 54.2.”
He added: “Subdued consumer spending was reported to have held back services activity in April, indicating consumers remain cautious as the extended squeeze on their spending power only gradually eases. Additionally, business spending was seemingly hampered by concerns over the domestic economy.”
Economists believe the chances of a rise in UK base rates when the Bank of England’s Monetary Policy Committee meets next week have reduced dramatically since mid-April, amid a raft of weak economic indicators and dovish comments from Bank Governor Mark Carney.
Figures published last week by the Office for National Statistics showed the UK economy grew by just 0.1% quarter-on-quarter in the opening three months of this year.
Source: Herald Scotland