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UK economy loses steam as services weaken more than forecast

Workers forge at manufacturers Kimber Mills in Cradley Heath, West Midlands May 15, 2015. — Reuters picWorkers forge at manufacturers Kimber Mills in Cradley Heath, West Midlands May 15, 2015. — Reuters picLONDON, Sept 5 — Britain’s services sector grew at the slowest pace in almost a year in August as economic uncertainty reduced demand.

IHS Markit said its Purchasing Managers’ Index for the largest part of the economy fell to 53.2, the lowest since September 2016, from 53.8 in July. That was a sharper drop than forecast by economists in a Bloomberg survey, although the gauge continues to signal growth.

Markit’s industry reports — which include manufacturing and construction — suggest the economy will grow about 0.3 per cent this quarter, matching the pace of the three months through June. But Chief Economist Chris Williamson warned the decision to leave the European Union is weighing on optimism and momentum is “gradually being lost.”

The services survey showed that a measure of new business weakened, with survey respondents citing “fragile” confidence. The slowdown in August was most evident in hotels, restaurants and other consumer-facing businesses.

Cost pressures intensified, due to wages, fuel bills and imported-goods prices, and some there was some concern that the pound’s recent drop against the euro could worsen the situation. Companies’ charges also increased, though some said subdued demand limited their scope to pass on higher expenses.

The Markit survey also showed that there’s pressure on operating capacity, demonstrated by the steepest rise in backlogs of work since July 2015. That rising workload saw the rate of job creation accelerate to its strongest since the start of 2016. — Bloomberg

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