UK services slows: reaction - Telegraph The services number was a lot weaker than expected, but it's still significantly above what's happening in the eurozone ... If we continue to see weakness or more likely contraction, then that's the point at which the Bank of England might decide to engage in more QE. But if we hovering around where we are now, maybe slightly higher, then I suspect that that might be a good argument for remaining on hold. It's a little bit disappointing but has to be seen in the context that it rose 4 points in the previous (two) periods ... it's still a decent rate of expansion for the biggest share of GDP output. The fact that the expectations rose also raises hopes that this isn't the start of a downtrend. More QE is an option but it's not screaming out that we need further emergency stimulus. In line with the manufacturing numbers, the services index has fallen back and the decline is slightly more than expected. Nonetheless, it still leaves the index in solid territory and the net result should be that, not just the services sector, but the economy as a whole, expands in the first quarter of this year. Growth looks set to be modest rather than stellar but it should be growth nonetheless. The policy outlook is a diffciult question. Our view is that we'll probably see more QE because the level of growth is still set to be below trend and uncertain. Despite a fall in the headline balance from last month's high, it's encouraging that the services PMI indicated another month of solid growth in output. The orders pipeline remained strong, even though this seems to be supported by heavy discounting as companies take a cut in their profits to remain competitive. These figures, along with the encouraging manufacturing figures last week, suggest that a technical recession will probably be avoided after all, with GDP likely to post a small increase Q1. However, the outlook further out is still dominated by downside risks, stemming from the Eurozone crisis and the potential for an increase in oil prices.