Services sector activity at its weakest for five years

3 June 2008
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04 June 2008 | Jake Kanter

Activity in the services industry contracted for the first time in more than five years last month.

According to the latest CIPS/NTC Purchasing Managers Index on services, where a figure below 50 represents contraction, activity in the sector last month registered a figure of 49.8. It signalled a slowdown compared with April's growth figure of 50.4. Market conditions were subdued because of the credit crunch and weak housing market.

New orders also fell into decline for the first time in five years. Activity fell to 48, a sharp drop from the previous month that registered 51.5. Conservative spending by clients contributed to the downturn.

Input prices rose to another record high, hitting 67.7 compared with 67.3 in April. Fuel prices were the dominant factor for the upturn, as well as higher charges from suppliers.

This affected the prices charged by providers as they climbed from 55.2 recorded in April, to reach 55.8 - the third highest reading since the survey began.

The sector's profitability fell to 43.9, compared with 45.9 the month before. Staff levels also decreased to 46.5, sinking below 50 for the first time in 57 months. In April the figure was 51.

* Further coverage of PMI reports is available at http://www.supplymanagement.com/pmi



SMjun2008

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