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Service sector growth slows sharply

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Date: Tuesday 06 May 2008

LONDON (ShareCast) - Britain’s services sector is on the cusp of recession following a slowdown in growth to its weakest in five years last month.

The Chartered Institute of Purchasing and Supply's measure of the sector’s strength, which accounts for around two-thirds of the UK economy, fell to 50.4 in April from 52.1 in March.

That’s far worse than the 51.7 predicted by analysts and means the sector is dangerously close to the 50 mark, below which indicates contraction.

It was the poorest read since March 2003 and might normally have prompted a rate cut, but inflation pressures are expected to make the Bank of England think twice before lowering borrowing costs again.

The input prices component of today’s report soared to its highest since records began in 1996, up to 67.3 in April from 66.2 the month before, while the prices charged index fell to 55.2 from 56.2.