Service sector growth shows signs of fading

SERVICE SECTOR growth is set to fade, according to a "disappointing" survey of business activity that will ease the Bank of England's worries over domestic inflation, writes Philip Thornton.

The sector grew at a slightly faster rate last month, the Chartered Institute of Purchasing and Supply (CIPS) said yesterday. But its survey showed that growth in job creation and in new volumes slowed in May.

Peter Thomson, CIPS director general, said: "This is slightly disappointing. It's not as much as one might have anticipated."

CIPS' business activity index rose to 56.4, up from 56.3 in April, on an index where 50 is the dividing line between recession and expansion. Business confidence also rose - to a two-year high - registering 80.9, up from 78.5. But the employment index fell sharply from 52.6 to 50.8, while new business fell to 54.6 from 56.5.

"I find the optimism rather startling against this modest increase in activity," said Mr Thomson.