Input and output prices in service sector reach record highs

5 March 2008
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05 March 2008 | Paul Snell

Growth in the services sector picked up speed in February, rising for the third successive month.

According to the latest CIPS/NTC report on services, activity in the sector reached 54, above the no-change mark of 50.

The measure has now been above 50 for a month short of five years. The figure, which compares to 52.5 in January, was a five-month high, and reflected an increase in new business in the sector.

New business rose accordingly, up from 52.3 the previous month to 54.6 in January. Winning new contracts helped to offset uncertainty over the strength of the economy. New business wins were particularly strong in the transport, storage, communications and personal services sectors.

But the prices charged by providers also hit its highest level in the 12-year history of the report. Average charges registered 56.8 last month, compared with 55.3 in January. The sharp rise was blamed on companies attempting to shield themselves from the rise in input prices.

Last month input costs also reached a record high, registering 65.6, as materials increased in price and suppliers attempted to pass them on.

The difference between rising input and output costs and weak sales growth hit firms' profit margins. Profitability fell below the no-change mark of 50, reaching 47.5 in February.

* Further information on PMI reports is available at http://www.supplymanagement.com/pmi



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