LONDON, Oct 3 (Reuters) - Britain's service sector growth slowed in September and services providers shed jobs for the first time in 10 months, a survey showed on Wednesday, casting more doubt on the chances of a sustained recovery.
SEPT AUG FORECAST Services PMI headline index 52.2 53.7 53.0 Business expectations index 67.0 66.5 N/F Composite PMI output index 51.1 52.2 - Employment index shows first job losses since Nov 2011 - Input prices rise at nearly unchanged rate - New business increases at slightly faster pace - Prices charged largely unchanged
ECONOMISTS' COMMENTS: TOM VOSA, NATIONAL AUSTRALIA BANK:
"(The PMIs) have been overstating GDP growth recently and we think this is a quarter where they understate it as you get the Diamond Jubilee and the Olympics effect coming back into Q3... What they show us is an economy which, in an underlying sense, is really flatlining, which is what we think happened in the second quarter and the third quarter again as well.
"There's nothing to say here that we are going to see an upturn in the fourth quarter. If we don't, then revisions for 2013 start to get pencilled down a little bit... and we are looking for around probably 0.8 percent growth then. So it's still a very disappointing recovery.
"I don't think it changes it for tomorrow. My suspicion is that we'll get no change (in Bank of England policy)... It doesn't really change the prospects for November since we thought they would extend QE anyway."
MARTIN BECK, CAPITAL ECONOMICS
"September's UK CIPS/Markit report on services is consistent with the message from the other activity surveys released earlier this week, namely of an economy which is struggling to grow."
"The drop in the balance suggests that temporary factors - including a gain to sectors like hotels and restaurants from the Olympics - were behind August's unexpected rise.
"A weighted average of the three main activity balances of the manufacturing, construction and services surveys is now consistent with flat GDP in the third quarter.
"Overall, then, it is looking like the rebound in the economy expected in Q3 is struggling to get any oomph behind it."
JAMES KNIGHTLEY, ING
"The survey compiler adds that the employment index has fallen below the 50 break-even level for the first time since November last year. They also state that the aggregate PMI for all the industries is at 51.1 versus 52.2 in August, so remains in growth territory and they estimate it's consistent with underlying GDP growth of around 0.1 percent Q/Q.
"In reality it is going to be higher - probably closer to 0.4-0.5 percent on the back of a technical bounce relating to working day effects. The Queen's Diamond Jubilee holiday meant fewer working days than usual in the second quarter, which the BoE estimate knocked around 0.5 percent off GDP growth.
"Today's report is unlikely to significantly influence the BoE's policy decision tomorrow given they still have around 15 billion pound of the 50 billion pound QE announced in July to buy."
JENS LARSEN, RBC
"The truth is it is not a big change. If you were one of those looking for green shoots, then this told you that Q3 remained pretty miserable. I see underlying growth of about 0.2 percent on the basis of this, which is not very much. The only reason we will have a strong Q3 is because of special factors."
"The most concerning bit of it is the sharp fall in the employment index."
GEORGE BUCKLEY, DEUTSCHE BANK
"The data is weaker than expected, but it's consistent with very low GDP growth of roughly 0.1 per cent. Obviously you can have growth that deviates from the broader message, but what this seems to suggest is that on an underlying basis, growth is exceptionally weak.
"I think it will be a an important decision for the Bank, but this does increase the possiblity of action in time."
CHRIS WILLIAMSON, CHIEF ECONOMIST AT SURVEY COMPILERS MARKIT:
"The September service sector PMI adds to evidence to suggest that the UK economy barely expanded in the third quarter. GDP is likely to have grown by perhaps 0.1 percent as modest growth of services activity was offset by a slight drop in construction sector output and a steeper decline in manufacturing, according to the PMIs.
"Official data are likely to show a stronger GDP rebound, reflecting a technical bounce-back from second quarter weakness arising from extra Jubilee holidays, but the PMI provides an insight into the underlying trend of the economy, and - like the BCC survey - warns of near stagnation.
"Employment has also suffered in response to the slowdown, with September seeing one of the steepest cuts to service sector staffing since 2009. With the mini-boom in the labour market having now come to an end, it seems inevitable that unemployment will start to rise again.
"Hopes are therefore pinned on the recent upturn in new orders being sufficiently strong and sustained to bring about improved growth of business activity and renewed hiring in coming months. New orders across all sectors grew at the fastest rate since May, though it is too early to say if this simply reflects a revival after an Olympics-related lull, as indicated by many companies."
(Reporting by Sven Egenter)
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Keywords: PMI SERVICES/BRITAIN