''Signs of recuperation'' in UK services sector

5 May 2009

06 May 2009 | Martha McKenzie-Minifie

Contraction in the UK services sector continued last month, signalling the longest period of tightening since the CIPS/Markit Purchasing Managers' Index for the sector began in 1996.

The PMI headline business activity index - in which a figure below 50 represents contraction - recorded 48.7 last month. It was 45.5 in March and 50.4 in April last year.

Roy Ayliffe, CIPS director of professional practice, said the slower rate of contraction indicated "some signs of recuperation" for the health of the UK services economy. "The rate of retrenchment eased to its weakest in eight months," he added.

The report said confidence was also up. Almost 46 per cent of its survey panel forecast a rise in activity in a year's time.

"Though sentiment consequently nudged upwards, purchasing managers voiced nervousness about immediate recovery, especially as the sector has now contracted for 12 months - the longest period in the survey's 12-year history," said Ayliffe.

Increased competition was reflected in lower output prices, the report said. Prices charged stood at 47 last month, the sixth successive month a figure of lower than 50 was recorded. In March it was 46.4 and in April last year it was 55.2.

There were some reports of lower costs, such as reduced supplier prices and lower wage bills, being passed on to clients. But the report found input costs continued to increase overall, largely as a result of the weak sterling driving up the price of imported goods.

Employment data showed another near-record for the survey in the reduction of people on the payroll.

SMmay2009

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