UK services growth slips in July, hiring hits 16-month low

LONDON, Aug 5 (Reuters) - Growth in British services companies slowed more than expected last month as hiring eased to its slowest pace since March 2014, suggesting the economic recovery weakened as it entered the second half of this year.

Wednesday's Markit (NasdaqGS: MRKT - news) /CIPS services purchasing managers' index (PMI) fell to 57.4 in July from 58.5 in June, undershooting a Reuters poll forecast for 58.0 but still indicating expansion among services businesses.

Taken together with manufacturing and construction surveys earlier this week, the PMI pointed to economic growth of around 0.6 percent per quarter, slightly slower than the 0.7 percent officially reported for the three months to June.

The findings will give Bank of England policymakers plenty to chew over as they prepare a slew of announcements for Thursday about the economic outlook and interest rates.

BoE Governor Mark Carney said last month it would take sustained growth of more than 0.6 percent per quarter to take up any remaining slack in the economy, a key factor behind any increase in interest rates.

And survey compiler Markit suggested the upturn was relying on financial services companies, which in July enjoyed their best month since 2013. By contrast, business services like architects and accountants suffered their weakest growth in almost three years.

"A deterioration in service sector growth is the latest in a stream of signals that the economy has slowed as we move into the second half of the year," said Chris Williamson, chief economist at Markit.

While the slowdown will probably not deter hawks on the Monetary Policy Committee from voting for higher interest rates this week, Williamson said the signs of cooling in the economy would dissuade the majority from doing so for now.

The services employment index sank to a 16-month low in July, adding to tentative signs the labour market has started to moderate following a strong two-year run.

However, new business flowed in at its fastest rate in three months, after falling to a six-month low in June.

The all-sector PMI, a composite of the services, manufacturing and construction surveys, fell to 56.7 in July, its lowest since December 2014, from 57.4 in June.

* Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence. To subscribe to the full data, click on the link below: http://www/markit.com/information/register/reuters-pmi-subscriptions For further information, please phone Markit on +44 20 7260 2454 or email economics@markit.com Editing by Larry King