US non-manufacturing sector rebounds but UK slows

The Federal Reserve may have cut interest rates by 75 basis points in the past two months but so far the economy has held up relatively well.

At least the service sector as a whole continues to grow. In fact, yesterday the Institute for Supply Management reported that its index of business activity for the non-manufacturing sector rose to 55.8 in October from 54.8 in September.

Things could yet get worse though as a Federal Reserve survey shows that banks tightened lending standards in the past three months and credit concerns continue to dog the financial sector.

The next major central bank to cut interest rates could be the Bank of England if the recent string of economic data out of the UK is anything to go by.

Yesterday, the Office for National Statistics reported that UK manufacturing output fell 0.6 percent in September while industrial production fell 0.4 percent.

Meanwhile, the British Retail Consortium reported that like-for-like retail sales grew just 1.0 percent year-on-year in October, down from 3.0 percent in September and the slowest rate of growth since November last year. Total sales grew 3.0 percent on the year, down from a 4.9 percent rate in September.

Indeed, the UK service sector appears to be generally slowing. The Chartered Institute of Purchasing and Supply/NTC service activity index slid from 56.7 in September to 53.1 in October, well below forecasts for 56.1 and its lowest level since May 2003.

The National Institute of Economic and Social Research estimates that the UK economy grew by 0.7 percent in the three months to October, down from the 0.8-percent rate in the three months to September.

The BoE is scheduled to announce its interest rate decision on Thursday.