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Services sector sees slowing growth


The news will add to pressure on the Bank of England, which meets on Thursday, to inject more cash into the economy

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Growth in the service sector slowed more than expected last month despite price cutting, the latest data showed on Wednesday, adding to pressure on the Bank of England to inject another round of cash in to the economy.

The dominant services sector, which accounts for around three quarters of output, fell to an eight-month low of 51.3 in June, below May's 53.3 and much lower than expectations for a more moderate easing to 52.8, according to the Markit/CIPS purchasing managers' index (PMI) for the services sector.

A 50 reading is the dividing line between growth and contraction and the index has held above the break-even mark for 18 months, but Markit said the latest figures suggested the sector grew by only 0.2 percent last quarter.

Both the construction and manufacturing sectors this week showed falls in June, according to the PMI indices.

Worryingly for policymakers, once again some of that minimal growth was generated by fulfilling existing orders. The outstanding business index has been in contractionary territory for 14 of the last 15 months.

The services economy saw one of its worst months since the recovery began three years ago, with the June survey showing signs of growth stalling. The services PMI probably cements the case for further stimulus from the Bank," said Chris Williamson, chief economist at data compiler Markit.

The data comes after separate PMIs showed construction activity fell at its fastest pace in two-and-a-half years during June and that the manufacturing sector contracted for the second month running.

Markit said the June PMI surveys pointed to one of the weakest months in more than three years and suggested the British economy contracted 0.1 percent in the last quarter.

Britain slipped into its second recession at the start of the year in four years and economists see tepid growth ahead at best, with only a small bounce from London's hosting of the Olympic Games, leading to calls for the government and Bank to act.

The Conservative-led coalition government, which has focused on cost-cutting to reduce a record budget deficit, has also introduced measures to get credit flowing through the economy and vowed to do more to boost house building and infrastructure spending, though many economists think proper fiscal stimulus might be needed.

Faced with a struggling economy the Bank is expected to flood markets with another 50 billion pounds of cash this week, on top of the 325 billion pounds it has already pumped in, as falling inflation gives it more room to manoeuvre.

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