Sector-wide growth supports services expansion

4 April 2004
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05 April 2004 | Gareth Mytton

All areas of the UK services sector enjoyed higher activity in March than February, according to the latest PMI figures.

The services sector business activity index - a composite indicator of business conditions from CIPS and NTC Research - stood at 58.7, a marginal slip on February's 59.5 but still well above the 50 figure that indicates no change on the previous month.

The hotels and restaurants sector, along with IT, saw the biggest increases in activity, as the new orders index (60.7) indicated growth for the eleventh straight month.

A buoyant economy, the willingness of clients to commit to orders and new products all supported the sector's healthy performance. Backlogs declined when companies increased productivity, rather than when activity fell, although they also took on more staff in anticipation of more orders.

A slightly larger proportion of companies were able to pass higher input costs on to customers in March than February (10.7 per cent, compared with 9 per cent).

Higher labour costs, utilities bills and raw material prices - in particular, steel - pushed the input price index to 57.1. Hotels and restaurants, along with financial intermediation companies, suffered the biggest increases.

Growth also slipped in the euro-zone in March, according to NTC Research. The service sector business activity index slipped to 54.4. All four of the biggest economies experienced slower growth. The sharpest drop came in Spain, after disruption following the Madrid bombings and the general election.

Meanwhile, in the US, 42 per cent of companies said growth was up, in the Institute for Supply Management's non-manufacturing report on business. Its business activity index rose to 65.8, from 60.8 in February.

* More information on the UK and euro-zone PMIs is available at www.ntc-research.com. The full text of the ISM reports on the US economy for February, and previous reports, is available at http://www.ism.ws/ISMReport/index.cfm.

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