Service sector activity continues record decline

5 November 2008
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05 November 2008 | Paul Snell

Activity in the service sector fell to a new low last month as poor economic conditions undermined confidence, spending and investment.

According to the CIPS/Markit Purchasing Managers' Index for services, where a figure below 50 represents contraction, activity in the sector reached 42.4 in October. This compares with 46 in September and is the sixth successive month the index has fallen. The hospitality sector was hit particularly badly by economic conditions.

The overall decline in activity was accompanied by a fall in the major indicators such as new orders, outstanding business and staff levels.

New business reached 40.1 - a survey record - compared to 45.2 the month before. The credit crisis led to a postponement of decisions, unwillingness to commit to contracts and less spending. Outstanding business fell from 42.1 in September to 39.3 last month, as a lack of new orders allowed firms to clear backlogs. Employment was also affected as a result, falling to a low of 45.7.

Input prices rose, but at a much slower rate than the month before, consistent with changes seen in both the manufacturing and construction industries. Lower fuel costs saw the index reach a figure of 58.1 in October.

As a result of the economic gloom, optimism for the future of the sector reached its lowest ever level, 50.8 last month, down from 58.2.

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



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