Surprise increase for US services while UK suffers

17 October 2001
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18 October 2001 | Robin Parker

Purchasing activity in the US non-manufacturing sector has made an unexpected jump, although manufacturing has continued to decline following the recent terrorist attack.

But the UK services sector fell for the first time since February 1999 amid widespread cancellations of conference, hotel and travel bookings.

According to the National Association for Purchasing Management (NAPM), the US non- manufacturing purchasing managers' index confounded expectations by rising 4.7 points to 50.2 in September, above the 50 mark that indicates no change. A 2 point fall had been expected.

Transport companies saw the sharpest falls in business activity, new orders and employment, amid worries over freight and business travel. However, the NAPM predicted growth in the defence and energy industries.

Manufacturing contracted for the fourteenth successive month, down by 0.9 points to 47. But there were no commodity shortages and only coal, diesel fuel and propylene rose in price. Lead times for manufacturing supplies also declined.

In the UK, the services business activity index dropped to 48.1. New orders fell more quickly than in August, as customers waited to assess the economic impact of the US attacks before placing new contracts.

Manufacturing continued its decline, with heavy falls in new orders and export orders. An accompanying index found that the euro-zone manufacturing sector declined for the first time in four years.

Next month's figures will be crucial in determining how far the terrorist attacks have aggravated the continuing economic downturn, said Melinda Johnson, head of policy at CIPS.

"But the Bank of England has cut interest rates by half of one per cent in the past few weeks, which might reverse the slowdown in services."

SMoct2001

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