Business and IT services lead healthy sector growth

3 August 2011

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3 August 2011 | Angeline Albert

The UK’s services sector enjoyed strong growth in July buoyed up by new business, according to the latest Purchasing Managers’ Index (PMI).

The seasonally adjusted Markit/CIPS Business Activity Index shows growth in the sector accelerated at its fastest pace for four months, recording 55.4, a stronger performance than the June figure of 53.9.

Business services and IT and computing registered the steepest gains in activity, but falls were seen in hotels, catering and restaurants and the personal services categories.

Stronger market conditions and higher enquiry levels contributed to the sector’s good news story. However, employment levels were slightly down last month and business confidence was low.

Input cost inflation continued its recent fall in July, but remained at an elevated level. Higher energy and utility bills, supply chain pressures and increased food costs were reported as the principal drivers of inflation.   

Paul Smith, senior economist at Markit, said: “A key question will be whether July’s above-average increase in services sector activity can be sustained going forward. Given the headwinds of austerity at home and the ongoing public debt issues in major export markets, the scenario of a continued choppy recovery would, at the present time, be the best forecast for the sector’s performance in the coming months.”

Commenting on the encouraging figures, CIPS chief executive David Noble said: “These are surprisingly strong figures for the UK services sector, following on from a disappointing manufacturing PMI at the start of the week. However, it’s far too early to expect any improvement on employment figures as any green shoots will need time to blossom before businesses confidence can improve.”

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