Crunch slows service sector

The UK’s services sector grew at its slowest pace in more than a year in
September as the credit crunch hit confidence in the financial sector.

The Chartered Institute of Purchasing and Supply and NTC, the research group,
said their index of services activity fell to 56.7 from 57.6 in August, slightly
below forecasts but still indicating growth above the long-run average.

However, the survey also revealed that prices in the services sector have
risen even though confidence in future business was beginning to weaken.
Staffing levels had not changed during the period.

The news is likely to reinforce predictions that interest rates will remain
unchanged at 5.75% – the Bank of England’s monetary policy committee is due to
announce its monthly decision today (Thursday 4 October). Continuing
inflationary pressure is likely to counteract calls for a rate cut following the
recent financial turmoil in the credit markets.

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