Not too much wrong with UK economy

There were further signs of a moderation in the UK economy yesterday, but no indication that it is headed for a serious downturn.

According to the British Retail Consortium, retail sales measured on a like-for-like basis fell 1.0 percent in August compared with a year earlier. However, this is an improvement from July, when sales fell 1.9 percent on the year. Total sales, which include new floorspace, rose 2.9 percent on the year, having risen for most of this year.

Meanwhile, service sector growth in the UK slowed in August, according to the Chartered Institute of Purchasing and Supply/NTC Research's services Business Activity Index, which slipped to 55.2 last month, its weakest in three months, from 56.3 in July. According to Reuters, this is below consensus expectations for a slight fall to 56.0. The index for new business also slipped, to 56.0 from 56.8.

Economists don't seem overly worried about the fall.

"Taken with manufacturing just into expansion territory and construction rising at its fastest rate in over a year, there is not too much wrong with the UK economy," said Geoffrey Dicks, economist at RBS Financial Markets.

Howard Archer at Global Insight acknowledged that "service sector activity is still reasonably healthy", although he still expects the Bank of England to cut interest rates again around November.

The euro zone services PMI also fell, albeit slightly to 53.3 in August, exactly as economists had expected, from 53.5.

Meanwhile, news that China and the EU have signed a deal to end their textile row should also be good news for European retailers.