Services sector wobble pressures Bank to up QE
Tuesday 06 March 2012
Related articles
A February wobble for the UK's powerhouse services firms yesterday raised the chances that the Bank of England's rate-setters will be forced to print more cash to aid an uncertain recovery.
The sector – which accounts for around 75% of the economy – saw its slowest pace of growth since last November, according to the latest Chartered Institute of Purchasing & Supply/Markit activity index. It added that, though confident, firms are having to slash prices and barely hiring new staff.
Its index, where a score above 50 indicates growth, slowed from January's 11-month high of 56 to a worse-than-expected 53.8 last month. "The pressure to undercut the competition is acute," Cips' chief executive David Noble warned. Most services firms managed some growth although hotels and restaurants suffered a setback.
The Bank of England will mark three years of record low interest rates on Thursday, although it is expected to hold fire on further stimuli for the economy. But these latest signs of weaker growth strengthens the case of committee doves Adam Posen and David Miles for further quantitative easing. Deutsche Bank chief economist George Buckley said the survey "supports our view of a further £25 billion dose of QE come the May meeting". Despite the UK's sluggish performance, countries on the Continent are having an even harder time with unemployment at a high for the eurozone and rising inflation because of surging oil prices.
The region's dominant economy Germany held its ground, but in Italy and Spain the decline in services firms worsened. The worrying slide leaves the 17-member single currency bloc in danger of a technical recession after its economy shrank 0.3% in the final quarter of 2011.
Markit chief economist Chris Williamson called the latest survey a "major disappointment". He said: "The weakness of the sector risks driving the eurozone back into another recession."
- 1 Massive stage collapse before Radiohead concert kills one
- 2 News in pictures
- 3 Leveson threatened to quit after public attack by Gove
- 4 In pictures: The bewildering face of China
- 5 Osborne: The people’s damning verdict
- 6 Ed Miliband: 'Cameron is the last gasp of the old guard'
- 7 Savers start a 'jog' on Europe's banks as Greece votes
- 8 For whom the bell tolls: £20m 'Memo' project takes shape on Dorset's Jurassic coast
- 9 Still standing: George Galloway reveals why his staunchly Leftist outlook is still invariably right
- 10 Aung San Suu Kyi: A lesson in the value of kindness
- 1 Massive stage collapse before Radiohead concert kills one
- 2 Patrick Cockburn: Greece's day of reckoning dawns in a climate of anger and uncertainty
- 3 The Blagger's Guide To: The best (and worst) fathers
- 4 We just click: How Lego keeps building on its success
- 5 Revealed: Harry Potter is the Antichrist!
- 6 The Leveson Inquiry: We're in this together!
- 7 Osborne: The people’s damning verdict
- 8 David Flatman: Over and out
- 9 Frank Zimmerman and me: The truth about the troll who tormented Louise Mensch
- 10 Aung San Suu Kyi: A lesson in the value of kindness

Experience the Heineken Hub
Get free wi-fi and exclusive i content while you enjoy a tasty pint of Heineken at participating pubs.

Win a sumptuous three-night stay in Austria
Get away from it all in the fresh mountain air at the four-star Hotel Edelweiss & Gurgl.

Win a five-star foodie weekend to Liège
Spend two nights in gourmet heaven at a top hotel in the capital of French-speaking Belgium.

A home to be proud of with Halifax
Download the Halifax's brilliant, free new Home Finder app, and take all the pain out of finding your dream home

Playing a game-changing role during the Games
Cisco is providing the solutions for London 2012's complex IT needs.

Enter the latest Independent competitions
Win anything from gadgets to five-star holidays on our competitions and offers page.

Business videos from commercial thought leaders
Watch the best in the business world give their insights into the world of business.
Career Services
Day In a Page

Still standing: George Galloway

Daniel Radcliffe as drug-taking Beatnik poet

Objets czar: David Usborne’s collection of myriad objects

World's richest woman: Gina Rinehart

Comments