Recovery fears as services slow

STOCK market turmoil is hampering growth in Britain's dominant services sector, increasing fears the economic recovery is fizzling out.

A closely watched barometer of the sector, which accounts for 70% of the economy, from the Chartered Institute of Purchasing and Supply today revealed that growth decelerated in July for the second successive month. The survey's headline business activity index registered 54.7, still above the crucial 50 'no change' level but below June's 54.9 and May's 56.7. Incoming new business tailed off to its lowest since February.

The slowdown led to a slump in business confidence to its lowest this year. 'Uncertain trading conditions, linked in part to recent stock market volatility, continued to be blamed by those companies experiencing fewer enquiries and delays in the progress of projected orders,' the report said. Bucking the trend were transport and communications firms, which reported strong growth in new business.

Services employment fell for the 10th month in a row and dropped at the fastest rate for five months. Firms blamed the job losses on the slowing of order book growth and uncertainty about future business conditions.

Sterling was half a cent lower at $1.5635, or 62.75p against the euro.