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UK service sector PMI in Dec fall

Activity declines for the first time in two years

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The UK’s service sector Purchasing Managers’ Index (PMI), an industry barometer of economic activity, fell to a level of 48.9 in December from 50.2 in November.

CIPS and Markit who publish the benchmark said the decline in activity, a first for two years, was largely down to a fall in new business. Any figure below 50 is indicative of a contraction.

CIPS and Markit reckon the UK economy shrank by 0.2 percent in the final three months of 2012. "The first fall in service sector activity for two years raises the likelihood that the UK economy is sliding back into recession," said Chris Williamson, chief economist at Markit.

The services PMI follows a mixed set of data for December, with manufacturing PMI hitting a 15-month high but construction PMI recording its lowest level since June.

Given the dominant role of the services sector and the fact that it has recently been the healthiest part of the UK economy on the output side, a December fall in activity is a significant blow to the hopes for economic growth, according to Howard Archer, chief UK economist at IHS Global Insight.

“At the moment, we expect GDP to have been flat in the fourth quarter of 2012. However, much will depend on just how much consumers spent in December. The worry is that service companies will have their work cut out to achieve even modest growth in the near term at least due to the still uncertain business outlook and tightening government spending,” Archer told CFOWorld.



UK service sector PMI in Dec fall
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