After reporting the slowdown in the manufacturing and construction industries today we have seen further evidence of the UKs faltering economy with the service sector reporting the biggest slowdown since 2001 when there was a outbreak of foot and mouth. "Allied with soft manufacturing data and a slowdown in construction growth, the overall picture provided by the latest PMI surveys is one of a stuttering UK private sector," said Markit's senior economist, Paul Smith.
Today service sector figures are the second worse ever, merely above contraction rate, David Noble, chief executive of CIPS, described the drop in the services purchasing managers' index as "eye-watering". It sent the pound falling to a six-week low of $1.6103 against the dollar.
The governments austerity measures are eating into economic demand, and could push us towards a double-dip recession.
"The PMI suggests that economic growth in the third quarter of 2011 is unlikely to improve on the 0.2% seen in the three months to June, and a contraction in the final quarter looks a distinct possibility unless business and consumer confidence improve noticeably in coming months," Chris Williamson of Markit warned.
Angela Eagle MP, Labour’s Shadow Chief Secretary to the Treasury, said in response to today’s services index showing the biggest monthly fall for a decade:
“These figures add to a bleak picture for the UK economy, which has flatlined since last autumn’s spending review and the VAT rise.
“It's no wonder that even the Chancellor's former supporters, from the head of the IMF to the founder of the world’s biggest bond fund, are now warning of the dangers of cutting too far and too fast and urging a change of course.
“Our complacent Chancellor needs to realise that carrying on regardless with a plan that isn’t working is not a credible policy. We need leadership on the world stage to agree a global plan for growth and a more balanced deficit plan that puts jobs and growth first. To kick-start the economy the Government should temporarily cut VAT and use the money raised from a tax on bank bonuses to build thousands of affordable homes and get people off the dole and into work."