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Growth in UK Service Economy Slows in January: Markit

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Growth in UK Service Economy Slows in January: Markit

The UK service economy expanded at a slower rate in January, as new business growth fell to its lowest level in eight months.

Markit Group’s gauge of UK service activity in January eased from 58.8 to 58.3. A median estimate of economists polled by Reuters called for 59. With a reading well above 50, however, the UK service sector was on solid ground to start the year.

Business activity has weakened for three consecutive months, a sign the UK’s service economy is stabilizing after a robust period of expansion. New business tumbled to its lowest level in eight months, while capacity shortages led to a sharp rise in backlogs. Work backlogs rose for the tenth consecutive month, increasing at the sharpest rate since May 1997.

“The service sector saw another month of strong growth in January, suggesting that the UK economy continues to recover at a rapid pace,” wrote Markit chief economist Chris Williamson in a statement. “Although the pace of expansion slowed, we must remember that growth was exceptionally strong in previous months, and also that parts of the country saw record rainfall in January.”

Positive expectations for growth led to higher staffing levels, Markit data showed. Business confidence in future activity rose to the highest level since March 2010, thanks to deepening UK recovery. The UK economy is forecast to grow 2.4 percent this year. Combined with the rapid pace of growth in manufacturing and construction, service sector growth adds to the prospect of a strong first quarter.

“Taken together, the three PMI services are signalling quarterly GDP growth of 0.8 [percent],” Williamson added.

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