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U.K. Services Growth Unexpectedly Cools For Second Month

A Chambermaid Cleans the Bathroom of a Room at a Hotel in London
While the U.K. services gauge has slipped, it’s been above the 50 level that divides expansion from contraction for 12 months. Photographer: Chris Ratcliffe/Bloomberg

U.K. services growth unexpectedly slowed for a second month in December after surging the most in 16 years at the start of the fourth quarter.

An index of services activity fell to 58.8 from 60 in November, Markit Economics and the Chartered Institute of Purchasing and Supply said in a report today in London. The median of 24 estimates in a Bloomberg News survey was for a reading of 60.3. Separate reports showed services in China and the euro area weakened last month, while economists forecast that they strengthened in the U.S.

The U.K. services gauge continues to point to growth in the sector. Markit said the reading, along with its factory and construction indexes, indicate economic growth accelerated to 1 percent in the fourth quarter from 0.8 percent in the previous three months.

“More strong growth looks likely as we move into 2014,” said Chris Williamson, chief economist at Markit. “It is perhaps inevitable, however, that we may see the rate of growth slow compared with the unusually strong pace seen in recent months.”

The pound extended its drop after the report and was down 0.4 percent to $1.6352 as of 9:56 a.m. London time.

BOE Decision

The Bank of England holds its first monetary policy meeting of 2014 this week and will keep its benchmark interest rate at a record-low 0.5 percent in line with its guidance, according to a Bloomberg survey. The Monetary Policy Committee has pledged to leave its key rate on hold until unemployment, now at 7.4 percent, falls to 7 percent.

While the U.K. services gauge has slipped, it’s been above the 50 level that divides expansion from contraction for 12 months. Markit said new business rose at a slower pace in December, though growth remained “sharp.” For the fourth quarter, new work rose at a survey record and the overall measure continues to point to a “historically strong rate of expansion.”

Markit’s manufacturing index declined to 57.3 last month from 58.1 in November, while the construction gauge slipped to 62.1 from 62.6, it said last week.

A Chinese services-industry gauge decreased to 50.9 in December from 52.5 the previous month, HSBC Holdings Plc and Markit said.

In the euro area, a services measure decreased to 51 last month from 51.2 in November, while a composite measure of services and manufacturing increased to 52.1 from 51.7. The readings were in line with estimates published on Dec. 16.

The Institute for Supply Management’s U.S. non-manufacturing index rose to 54.6 in December from 53.9, economists said before a report later today.

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