Pace of economic recovery slowed in December as growth in dominant services sector slipped to six-month low

 

Growth in the dominant services sector slipped to a six-month low as the pace of economic recovery slowed in December, amid predictions that it will ease off over the year to come.

The reading of 58.8 in the closely-watched Markit/CIPS purchasing managers' index (PMI) was below expectations, though still well ahead of the 50 level that separates growth from contraction.

It was the second monthly fall in the index of the services sector - which represents three-quarters of the economy and has led the UK out of recession.

The slowdown mirrors trends in manufacturing and construction, which also lost momentum during December compared to very strong performances in previous months.

It left the average PMI across all three sectors at a five-month low of 59.5.

Yet if borne out by official data, gross domestic product (GDP) would still have grown by 1% over the fourth quarter and 1.9% over 2013 - though the contribution of retail sales and trade will also have to be taken into account.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "Overall, the purchasing managers' surveys for services, manufacturing and construction indicate that the UK economy lost some momentum in December but still expanded at a healthy clip.

"Indeed, it still looks very possible that GDP growth in the fourth quarter of 2013 could have at least matched the 0.8% quarter-on-quarter expansion achieved in the third quarter.

But he said the figures reinforced the view that growth in 2014 will ease off a little.

Alan Clarke, Scotiabank's director of fixed income strategy, said there was probably "a bit more downside to come" for services but, taken outside comparison with previous figures, the 58.8 reading was still a "stonkingly good number".

Despite the slip, CIPS said the PMI report still signalled "a historically strong rate of expansion" following growth across every month of 2013.

New work reached an all-time high in the final quarter of the year - though this slipped back in December - with confidence high and increased marketing, and the release of new products bolstering sales.

Optimism was at its highest since March 2010, with well over 50% of firms forecasting growth over the next 12 months. Employment rose for a 12th successive month.

The weakest sub-sectors were hotels and restaurants, though these still saw "decent growth", said Markit chief economist Chris Williamson. He said the services sector ended 2013 "in a buoyant mood".

"Although growth of business activity slowed, it's come down from super-strong levels and the pace of expansion remains elevated.

"More strong growth looks likely as we move into 2014. It is perhaps inevitable, however, that we may see the rate of growth slow compared with the unusually strong pace seen in recent months."

PA

Start your day with The Independent, sign up for daily news emails
News
news
Arts and Entertainment
British author Helen Macdonald, pictured with Costa book of the year, 'H is for Hawk'
booksPanel hail Helen Macdonald's 'brilliantly written, muscular prose' in memoir of a grief-stricken daughter who became obsessed with training a goshawk
Sport
footballLive blog: Follow the action from the Capital One Cup semi-final
Life and Style
food + drink
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Tradewind Recruitment: Intervention Teacher Required To Start ASAP.

£125 - £150 per day + Negotiable: Tradewind Recruitment: A 'wonderful primary ...

Tradewind Recruitment: Maths Teacher

£90 - £140 per day: Tradewind Recruitment: Our client is an 11-16 mixed commun...

Recruitment Genius: PHP / Drupal / SaaS Developer

£32000 - £36000 per annum: Recruitment Genius: A rapidly developing company in...

Ashdown Group: Application Architect/Developer - Peterborough

Negotiable: Ashdown Group: Application Architect/Developer - Peterborough, Cam...

Day In a Page

Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century