Conflicting Growth Signals

Posted on: 04.08.2010    12:31:57

Britain’s services industry grew at its slowest rate in 13 months in July, a survey showed today and expectations for the sector barely picked up from last month’s sharp fall as concerns over spending cuts persisted.
The government presented an emergency budget in June containing sweeping austerity measures designed to tackle Britain’s bulging budget deficit, which is likely to translate into less business for the services industry so this comes as no surprise.

Employment in businesses such as restaurants, hotels and financial services pointed to contraction in July after minimal growth in June.

The rate of inflation fell slightly for both prices charged by firms in the service sector and for their input costs such as wages. That may offer encouragement to the Bank of England, which has held rates at record lows while keeping a close eye on stubbornly high inflation. Greater food price inflation is likely to hit towards the end of the current quarter.

Growth in Britain’s manufacturing sector eased slightly in July, with euro zone wobbles weighing on exports, but the headline figure still beat forecasts suggesting buoyant growth. However if that is the case why are a record number of firms investigating redundancy options?

Something doesn’t ring true.

Author: Chris Slay

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