Services pain eases and points to BoE rates standstill

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Figures for the biggest sector of the British economy today showed that, while it was still contracting, the pace of the decline was easing in August. Meanwhile, it appears that inflation in the costs of service companies is easing.

However, the Chartered Institute of Purchasing and Supply's index of activity still came in below the 50 level which marks a contraction. At 49.2, it was stronger than the 47.4 level reported in the previous month.

As a result of the tailing off of business levels, there were further job cuts in August for the fourth month in a row. Again, however, the contraction in staffing levels was not as bad as in previous months. Hotels and restaurants bore the brunt of the cuts.

Economist Paul Smith at Markit Economics, which helped compile the figures, warned against premature celebrations at the apparent easing of companies' pain. "Anecdotal evidence from the survey suggests that there remains a high degree of uncertainty in services markets, with clients on the whole reluctant to commit to spend."

Service-sector companies range from pubs to IT firms and make up by far the biggest proportion of the country's GDP.