Services in the doldrums as shoppers stop spending

13 March 2003
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13 March 2003 | Robin Parker

Purchasing activity in the UK services sector reached near-stagnation in February because of flat consumer spending and companies cancelling orders, according to the latest economic data.

Following National Statistics figures revealing a 1 per cent drop in high-street sales in January, the Confederation of British Industry (CBI) said sales in the past three months were the worst in four years.

In the CBI's distributive trades survey, more than a third of retailers reported below-average sales for the time of year, and a similar number cut orders.

Alastair Eperon, chairman of the CBI's distributive trades panel and a director of Boots, said: "The strong sales growth of 2002 has disappeared and the underlying trend is now for little, if any, year-on-year growth.

"There is evidence that worries about the impact of a possible war are undermining consumer confidence."

The CIPS/NTC Research purchasing managers' index fell to its lowest level in more than a year in February. The index of 50.2 was just above the 50 mark that indicates no change.

The new orders index marginally contracted for the first time since November 2001.

A fifth of firms reported fewer new orders than in January, and a growing proportion of their clients were deferring or cancelling spending because of the uncertain economic implications of an Iraqi conflict.

Rising oil prices contributed to higher purchasing costs, with the transport sector in particular affected by a rise in fuel charges.

The CBI also said the climate in manufacturing was one of "unremitting gloom", downgrading its predictions for economic growth this year to 2.2 per cent, well below the Treasury's forecast of 2.75 per cent.


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