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Friday, 7 June, 2002, 15:55 GMT 16:55 UK
UK service sector roars ahead
News in brief
The gap between the UK's service and manufacturing sectors has widened, throwing the spotlight once again on Britain's two-speed economy.

The Chartered Institute of Purchasing and Supply's closely-watched monthly services index climbed to 56.7 in May from 54.5 in April, outstripping the 55.2 score forecast by analysts.

A score above 50 on the CIPS index denotes expansion, while a reading below 50 signals a contraction.

The figures confirmed that the services sector is once again moving in the opposite direction to the manufacturing sector, which fell to 52.9 in May from 53.2 in April.

The decline shows that while the manufacturing sector is still expanding, it is doing so at a slower pace.

During the first three months of the year, the two sectors had appeared to be converging as manufacturers began to emerge from a protracted downturn while the service sector stagnated.

Interest rate dilemma

The widening gap between the two sectors makes it more difficult for the Bank of England's monetary policy committee (MPC) to set interest rates.

An interest rate increase aimed at curbing inflationary growth in the economically dominant services sector would run the risk of choking off the manufacturing sector's still-fragile recovery.

The MPC left interest rates unchanged at 4% on Thursday.

"The Bank of England would have seen this survey before they set rates yesterday, so that raises the possibility that at least one member voted for a rate rise," said George Buckley, economist at Deutsche Bank.

The Bank is due to publish the minutes of Thursday's MPC meeting later this month.

See also:

24 May 02 | Business
04 Jul 01 | Business
08 Jan 02 | Business
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