Rising oil slows UK services growth - report

British service sector growth slowed more than expected in August as soaring oil prices pushed up costs at their fastest rate…

British service sector growth slowed more than expected in August as soaring oil prices pushed up costs at their fastest rate in four months, a report showed today.

The Chartered Institute of Purchasing and Supply/NTC Research said its services Business Activity Index fell to 55.2 last month, its weakest in three months, from 56.3 in July.

However, this is unlikely to change expectations that the Bank of England will leave interest rates at 4.5 per cent this week.

But the index for new business also slipped last month, to 56.0 from 56.8, suggesting growth in activity is not likely to accelerate any time soon.

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Financial markets barely reacted to the report.

Growth in the euro zone service sector also eased. The euro zone services PMI fell slightly to 53.3 in August, exactly as economists had expected, from 53.5.

Companies in the transport and communications sector and the hotels and restaurants sector saw some of the strongest growth in new orders last month, suggesting the July bombs in London have done little lasting damage to tourism.

Outstanding business contracted for the first time since January, with backlogs down sharply in financial intermediation as well as information technology and computing.

Input price rises accelerated to reach their fastest pace since April, driven mainly by the climb in energy costs as crude oil rushed toward new record highs. The input prices index spiked to 57.9 from 56.6.

Growth in prices charged, while less robust, also picked up marginally, with this sub-index up to 51.4 in August from an 18-month low of 51.3 in the prior month.

The employment index dipped, to 52.4 from 52.9 in the prior month, although business expectations soured a bit, mainly as companies worried about the health of the economy.