Downbeat figures precede rates call

Britain's service sector, consumer confidence and retail sales all declined last month, according to a downbeat set of results issued before tomorrow's decision on interest rates.

Business expectations among services firms fell to their lowest level since the start of the Iraq war in 2003, the Chartered Institute of Purchasing and Supply said. Its overall index, based on a survey of hundreds of companies, slipped for a fourth month in a row to 56.7 from 57.9 in July on a scale where a number above 50 denotes expansion.

However, the survey also showed a surge in both input costs and prices charged, which analysts said would keep the Bank of England on notice for another rate rise before the end of the year.

"This should help boost the case for a November rate rise, but the softness in some of the recent surveys gives weight to our view that rates will not go above 5 per cent," said James Knightley at ING Financial Markets.

The Bank's Monetary Policy Committee surprised many in the City when it raised the base rate by a quarter point to 4.75 per cent last month.

Andrew Smith, the chief economist at the accountants KPMG, said: "No one expects a move this month, but after last month's surprise hike another increase cannot be completely ruled out."

However, there was more downbeat news from the high street where annual retail sales growth slowed in August. The British Retail Consortium said like-for-like growth eased to 2.5 per cent from July's 3.4 per cent.

Meanwhile Nationwide building society said its index of consumer confidence slumped 11 points to 83, marking a record low for the two-year old survey.