BRITAIN'S services industry has seen growth slow for the second month running, according to the Chartered Institute of Purchasing and Supply (CIPS).
Its purchasing managers' index for April stood at 59.1, down from 60.3 in March. Any reading above 50 denotes growth. But while it continues to expand strongly, particularly in contrast to manufacturing - where the strength of the pound and the level of interest rates have posed the threat of recession - it should put paid, for the time being anyway, to any lingering worries of a further increase in base rates.
The Bank of England's Monetary Policy Committee's two-day meeting ends at noon today, and the overwhelming market perception is that it will again leave rates on hold at 7.25%.
Most of the economic data in the run up to this latest meeting of the MPC has favoured the doves on the committee who are against lifting rates.
The CIPS survey shows that while one-in-four companies reported expansion during April, twice as many reported contraction. Seasonally adjusted new business growth fell to a six-month low at 57.2 against 59.7 in March.
The survey also said that input prices rose on the back of higher wage pressures due to skill shortages. This has been an ongoing feature of the services sector which covers transport and communication, financial services, business and personal services, hotels and restaurants. It is the threat of wage pressures in the economy which has been one of the principle concerns of the hawks on the MPC.
However, the index of average prices charged also fell to a six-month low at 51.7 (52.5 in March) as ''strong competition continued to restrict the ability of many firms to raise prices''.
The modest fall in the pace of growth in the industry was generally attributed to the adverse effect of the strong pound on overseas demand.
But CIPS director Peter Thomson said: ''I think this perhaps marks the start of the expected slowdown in the services sector, but it has come later than expected.''
He added: ''If you look at output prices, it is clear that the lid has been kept on by service providers.''
Economists saw little in the findings to worry the Bank of England, suggesting that the long-awaited slowdown in the service sector was starting to come through.
Royal Bank of Scotland's Neil Parker said the survey provided a further shot in the arm to those looking for no change in rates from the MPC meeting.
General Accident's Andrew Milligan thought it likely rates had peaked but warned, ''a jump in the official wages data in the spring or a sharp fall in sterling would put the Bank in a quandary. We are not out of the woods yet.''
Goldman Sachs' Francesca Massone said that companies continued to report recruitment difficulties due to labour shortages, and this was likely to be reflected in coming months in higher wages and prices charged as firms passed on higher costs to customers.
She said the weakness of the manufacturing sector removed the possibility of an interest rates hike at the MPC meeting. ''Interest rates are likely to be kept on hold until the future paths of sterling and domestic demand growth become clearer,'' she added.
Today's Distributive Trades Survey for April from the Confederation of British Industry should shed some light on the High Street retailing sector.
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