The UK’s dominant services sector weakened in February, registering its slowest rate of growth for almost three years, a survey has indicated.
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Softer output and new business growth resulted in weaker job creation across the United Kingdom construction sector in February. Markit economist Chris Williamson said there are “downside risks to even this modest expansion”.
But a reading of 52.7 on the Markit/CIPS services purchasing managers’ index (PMI) for February – where the 50 mark separates growth from contraction – was the weakest since March 2013 and well below economists’ expectations.
“Taken together with Tuesday’s manufacturing PMI release, these reports suggest a slight moderation in the pace of growth across much of Ireland’s private sector in February, which is not surprising given external developments”, Investec Ireland chief economist Philip O’Sullivan said.
“The survey data raise the prospect of economic growth deteriorating further from the already meagre pace seen late a year ago, when GDP rose only 0.3 percent”, Williamson said.
A sister survey on Monday showed Irish manufacturing activity was the slowest in two years in February. “The focus will instead increasingly shift to whether policymakers may soon need to dig deeper into their toolbox to introduce new measures to shore-up the economy with additional stimulus, and what tools might be used”, he said.
“Despite rising slightly compared with January’s three-year low, business confidence in the service sector remained at a level which has historically presaged an imminent slowing in the economy to near-stagnation or worse in coming months”.
Samuel Tombs, at Pantheon Macroeconomics, said the wave of weak data was “the clearest indication yet that uncertainty created by the European Union referendum is hurting the economy”.
“History shows that the PMI has now moved down into territory normally consistent with the central bank cutting interest rates rather than hiking”.
One bright spot was employment, with companies in the services sector adding staff for the second month in a row, albeit at timid pace.
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The new business index eased to a four month low, indicating that the current global downturn is beginning to impact on the sector.
