Troubled US economy casts shadow over UK growth

23 May 2001
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24 May 2001 | Robin Parker

Purchasing managers fear that the troubled US economy has led to the weakest growth rate in UK private-sector services in two years, according to the latest CIPS report.

About one-fifth of companies said their activity levels were lower in April than in March, leading to the biggest monthly slump on record.

The manufacturing industry also faced an accelerating rate of contraction and recorded its lowest purchasing managers' index (PMI) level since February 1999. Falling output and order books contributed to the decline. However, the sharp fall in demand led to a drop in the lengthening of lead times during April.

Melinda Johnson, head of policy at CIPS, said: "Purchasing managers responded to the economic slowdown by running down inventories and working with colleagues to increase efficiencies.

"The worst affected sector by far was intermediate goods in manufacturing, which dragged down the overall PMI," she said. "The usually buoyant services sector has slowed substantially. Demand is being weakened by the global slowdown so even domestic customers are sourcing elsewhere or not buying at all."

UK companies' woes were also compounded by the strength of sterling, which was deterring foreign companies from sourcing here.

CIPS's findings concur with the Confederation of British Industry's Regional Trends Survey, which reported that business confidence among UK manufacturers fell at the sharpest rate since January 1999. This was particularly true of small and medium-sized firms, 42 per cent of which were less optimistic about their general business situation in April than in January.

SMmay2001

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