07 September 2005 | Rebecca Ellinor
Activity in the UK services sector continued to expand but at a weaker rate than previous months, according to the latest purchasing managers' index (PMI) report.
The business activity index - a composite indicator of sector conditions from CIPS and NTC Research in which an index above 50 indicates growth - recorded a reading of 55.2 for August. And while the rate of expansion was not as high as in earlier months (July's figure was 56.3) the report said growth remained "robust".
The monthly report said gains in new business supported ongoing growth in the sector as a whole. It said clients' confidence in the industry helped the sector secure new business. The introduction of new products and promotional activity were also cited as factors underpinning new contract wins.
Roy Ayliffe, director of professional practice at CIPS, said: "Purchasing managers noted sustained growth in the service sector in August, with the highest levels of activity being reported in the hotels and restaurants sector.
"The service sector's workforce continued to grow, as new hires were made to deal with business wins."
However, Ayliffe added that firms faced further pressure, from soaring inflation, driven mainly by oil prices. Input prices posted a reading of 57.9.
The report said: "High crude oil prices, which impacted on the cost of related items such as fuel and energy, was the principal factor reported to have driven the increase in overall input costs."
But while clients awarding contracts showed confidence in the market, those providing the services were less positive with just under half of the survey panel indicating expectations of increased business activity in 12 month's time.
Ayliffe added: "Business sentiment about the future took a slight knock amid concerns amongst service providers over the performance of other sectors of the economy. This fall in confidence was particularly true in the financial services sector."
Expansion was also recorded in the Eurozone which registered 53.3 for August, a small dip on July's figure of 53.5, according to NTC Research.
Business activity in the non-manufacturing sector in the US increased August with the Institute for Supply Management's (ISM) non-manufacturing report recording an overall index of 65, a climb on July's figure of 60.5.
• Coverage of previous months' manufacturing, construction and services PMI reports is available at http://www.supplymanagement.com/pmi
• 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 manufacturing economy for May and previous months is available at http://www.ism.ws/ISMReport/index.cfm.