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UK service growth slows in Dec, economic pickup weaker than thought: PMI

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Growth in Britain's dominant services sector slowed slightly in December, suggesting the economy expanded only modestly in the last three months of the year, according to a survey published on Wednesday.

[LONDON] Growth in Britain's dominant services sector slowed slightly in December, suggesting the economy expanded only modestly in the last three months of the year, according to a survey published on Wednesday.

The Markit/CIPS UK services purchasing managers' index fell to 55.5 last month from 55.9 in November but remained above its historical average, showing that the sector was still driving the economy.

Economists in a Reuters poll had expected the index to slow to 55.6 after growing at its fastest pace in four months in November.

The economy now looks poised to grow by 0.5 per cent in the fourth quarter, Markit said, down from its estimate last month of 0.6 per cent.

Britain is expected to have headed the pack of major economies again in 2015. But it has relied heavily on the services industry for growth, frustrating hopes for a more balanced recovery. "The services sector remained the key driver of the UK's economic upturn in December," Chris Williamson, chief economist at Markit, said. "A rosy outlook is by no means assured, however." A solid measure of new business was offset by the weakest pace of job creation in the sector since July, while long-term expectations for business activity among firms were the lowest since 2013.

The economy grew at its slowest pace in three years in the July-September period of 2015, expanding by a quarterly 0.4 per cent, according to official data released last month.

Williamson said factors such as government spending cuts, a potential interest rate hike by the Bank of England, uncertainty about the global economy and the prospect of a referendum on Britain's membership of the European Union posed "significant downside risks" to economic growth this year.

The central bank is expected to raise interest rates in the second quarter of 2016, according to a Reuters poll of economists. But with inflation close to zero and earnings growth sluggish, it may find this difficult.

Input prices and prices charged rose marginally in December, but were both below long-run averages.

AFP