Services sector suffers sharp slowdown

5 May 2011

5 May 2011 | Lindsay Clark

The UK services sector has seen a marked drop in growth according to the latest Purchasing Managers’ Index.

Although the sector continued to expand in April, activity recorded by the Markit/CIPS UK Services PMI declined by nearly three points to 54.3 in April, compared with March’s figure of 57.1. A figure of 50 indicates no change.

Many respondents attributed the slowdown to government cuts, although new business wins ensured the sector continued to grow.

Chris Williamson, chief economist at survey compilers Markit, said: “The survey’s measure of business activity showed the second-largest fall since October 2008, exceeded only by the sector’s weather-related slide back into contraction in December.

“Companies also grew increasingly worried about the future, with expectations for the year ahead running at levels normally only seen in times of crisis,” he added.

“Many companies reported that business had been boosted by government departments using up their budgets prior to the new financial year to a greater extent than usual in the first quarter, perhaps due to the impending closures of government departments and projects. This boost to growth has now gone into reverse.”

The survey had some good news for buyers. Input cost inflation reached a four-month low, but nonetheless remained well above the survey average.  Nearly 38 per cent of respondents indicated a rise in costs since March. Energy and fuel, combined with duty increases and higher supplier charges, served to drive inflation.

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