Record decline in services sector activity comes to a halt

4 February 2009

04 February 2009 | Jake Kanter

January was a better month for buyers in the UK services sector than December, but activity continued to fall.

According to the latest CIPS/Markit Purchasing Managers' Index for services, where a figure below 50 represents contraction, the industry registered 42.5 in the first month of 2009. It represented a slowdown in decline from the record low of 40.2 in December.

The continued contraction reflected a sharp fall in new orders, which declined for the ninth month in a row. Companies have cut budgets for services because of continued uncertainty over economic conditions.

The poor trading environment meant the market was "intensely competitive" and output costs fell to the lowest level in the survey's history last month. Input prices also rose at the slowest rate since November 2001 as firms reported lower transport and energy costs.

The reduction in outstanding business also eased slightly, recording 40.1 in January, compared with 38.4 the month before. The cancellation of projects and a reduction in the backlog of work in industries such as IT helped slow the contraction.

The decision of firms to cut staff numbers to counter sharply falling sales and profit margins meant employment also fell to a record low in January. Optimism for the future of the sector improved marginally last month, but fears remain that the recession will continue to weaken markets.

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

SMfeb2009

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