03 October 2008 | Paul Snell
Activity in the service sector reached a nadir last month, recording its worst reading in the 12-year history of the Purchasing Managers' Index.
According to the latest survey carried out by CIPS and Markit, where a figure below 50 demonstrates contraction, activity in the sector reached 46 in September, compared to 49.2 the month before. It is the fifth consecutive month that activity in the sector has shrunk.
Buyers reported "extremely difficult" conditions, facing a tough market and declining levels of new business, particularly in the hotels and restaurant sector. New business also shrank at a faster rate than in August, reaching 45.2 in September, down from 47.1 the month before.
Staff levels also continued to decrease for the fifth consecutive month as companies did not replace staff and laid workers off because of cost pressure. Employment reached 47.3 in September.
Prices charged for services increased last month but growth slowed to 54.5, the lowest reading in nine months. Input price inflation also slowed to reach 65.2, down from August's figure of 66.8. Rising food and utility costs contributed to the increase.
As a result, optimism for the future, which had slightly rebounded in August, fell to its second lowest level ever because of concerns that problems in the financial, housing and construction sector would reach other parts of the economy.Further coverage of PMI Reports is available at http://www.supplymanagement