UK services: expansion continues but growth rate slows

6 October 2005
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07 October 2005 | Anusha Bradley

Activity in the UK services sector continued to expand in September, but its growth rate was the lowest in nine months, according to the latest purchasing manager's index (PMI) report.

The overall CIPS/Royal Bank of Scotland PMI - a composite indicator in which an index above 50 indicates growth - registered 55.0. While that is a slight drop on August's figure of 55.2, it did signal continued robust expansion.

The input price index rose at its sharpest rate in 10 months to 61.2, as utility and labour costs increased and the high price of oil pushed up the cost of energy and fuel.

Despite this, more than half of the service providers surveyed remained positive that activity would continue to rise in the next year, with confidence rising to its highest level since March.

The report said: "Although at 55.3, the new orders index was the weakest level recorded for 12 months, new business volumes increased at a robust pace, with companies reporting underlying demand was strong and market confidence generally robust."

This growth in new business tested the capacity of firms to handle it. The outstanding business index recorded a reading of 50.4, a negligible slip on August's figure.

But in some cases higher workloads led to the recruitment of additional workers. Although it was only a modest growth with the employment index posting 51.8, it meant the UK services workforce expanded for the 26th consecutive month.

Roy Ayliffe, director of professional practice at CIPS, said: "On a less positive note, firms, particularly those in the transport sector, continued to face intense pressure from rising input costs. In spite of this," he added' "over half of service providers remained upbeat about the future."

Business activity in the non-manufacturing sector in the US saw a significant drop in September with the Institute for Supply Management's (ISM) non-manufacturing report recording an overall index of 53.3, a fall on August's figure of 65.

  • For coverage of previous months' manufacturing, construction and services PMI reports click here

  • The full text of the ISM reports on the US manufacturing economy for previous months is available at http://www.ism.ws/ISMReport/index.cfm

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