UK services sector growth hits two-year high

4 May 2006
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05 May 2006 | Anusha Bradley

Growth in the UK services sector boomed to its strongest rate since the start of 2004, according to April's CIPS/RBS Purchasing Managers' Index (PMI).

The business activity index rose to 59.7, from 57.4 in March. This was the highest reading recorded for 27 months.

Growth in sales underpinned high business activity with reports of new product launches, marketing drives and new contract wins. New business growth in April was the strongest for two years posting a reading of 58.8.

Financial intermediation and business services posted the strongest rates of growth, out-performing once again consumer-orientated sectors such as hotels, restaurants and personal services.

Levels of work outstanding increased for the fifth successive month and backlogs of work rose to its sharpest rate for two years, indicating growing pressure on capacity. New contract wins and insufficient resources were the main causes of unfinished business.

Increased workloads led to firms employing new staff. April's employment index of 52.8 signalled the highest rate of growth in new jobs for nine months, despite a skills shortage restricting recruitment.

With such high demand for services, firms were able to raise their charges for the 52nd month in a row. Many panellists said output charges were raised in response to an increase in input costs, which rose at the sharpest rate for 17 months. Firms said rising fuel and energy prices was a principal factor in driving overall inflation. Increased labour costs were also a burden on companies.

Despite high costs the services sector remained confident about the future. Roy Ayliffe, CIPS' director of professional practice, said only 6 per cent of those surveyed predicted a decline in business activity over the next year.

The overall Eurozone PMI for services posted a reading of 58.3 compared to 58.2 in March. Business workloads have now risen for 34 successive months.

  • Coverage of previous PMI reports is available at www.supplymanagement.com/pmi
  • More information on the eurozone PMIs is available at www.ntc-research.com


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