Experts predict New Year recovery

3 January 2002
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03 January 2002 | Robin Parker

Purchasing activity in the services and construction sectors is likely to pick up in March after a turbulent year, according to an industry analyst.

Luke Thompson, senior economist at NTC Research, said the difficult economic period, and the knock-on effect of the US terrorist attacks, could soon be over.

"Services have inched forward and there's a strong prospect of a turnaround in the first quarter," he said. "Proposed government investment in construction projects should help to turn it around."

The purchasing managers' indices for last December compiled by NTC for CIPS reported near stagnation in construction for the first time in more than three years and services continued to contract, but more slowly than in November.

Roy Ayliffe, director of professional practice at CIPS, said: "The services sector is at a positive turning point, and construction will dip into the negative only for a short while."

There are already strong signs of growth in the US, where November's non-manufacturing index from the Institute for Supply Management (formerly the NAPM) grew by 10.7 to 51.3, above the 50 mark that indicates no change.

But the pressure on purchasers in manufacturing, which has contracted in the UK for three consecutive quarters, is expected to continue for several months.

The Confederation of British Industry's (CBI) December survey of UK manufacturing orders reported that half of all order books, and 55 per cent of export order books, were below normal. The CBI does not expect the sector to recover until the second half of this year.

"Manufacturing order books are contracting sharply and we need to see inventories being replaced for the sector to turn around," said Thompson. "The challenge for purchasing managers is to keep input prices to an absolute minimum to improve margins."

Mark Berrisford-Smith, senior economist at HSBC, said the UK was robust enough to avoid a recession.

"The UK does not automatically follow the US," he said. "We have the fastest growing economy of the group of Seven major industrial countries. We'll see a period of sluggish growth, but hopefully things will get better in the second half if the US and Europe pick up."

Ayliffe said purchasers who demonstrate their skills to steer their organisations through this period will benefit.


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