Following the report today on the UK service sector, economists are seeing only bad news with the shockingly poor numbers. If the pro-austerity crowd didn’t get it before, they may not get it now that austerity only causes more economic damage in a troubled economy.
Just as the services sector is important in the US, it’s a large chunk (75%) of the UK economy and it’s sinking, again. Imagine the damage that GOP austerity will cause in the US if the crazies in the House get their way.
It is possible, although not likely, that the report was a blip caused by the wet weather. This was, after all, the fourth fall in the survey in a row and – December 2010 apart – was the weakest since April 2009, when the world economy hit rock bottom after the collapse of Lehman Brothers the previous September.
CIPS/Markit say that the reason the services purchasing managers’ index dipped below the 50 level that separates expansion from contraction was an unwillingness of firms to invest at a time when their customers were not spending.
This is entirely consistent with the UK’s flat-lining performance over the last couple of years: businesses see no point in buying new plant and machinery until there are signs that consumers are willing to spend more. But household budgets are being stretched by the squeeze on wages and the rising costs of essentials such as food and fuel.