UK services sector growth ''sluggish at best''

3 November 2011

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3 November 2011 | Adam Leach

Activity increased for the 10th consecutive month in the UK services sector but at a slower rate, buyers report.

The Markit/CIPS UK Services PMI for October showed activity had declined from 52.9 in September to 51.3. It also recorded a rise in new business orders, but again, at a slower rate, prompting CIPS CEO David Noble to describe overall performance as “sluggish at best”.

The declining growth is particularly significant because prices were cut, with the overall average output price dropping.

The sector fared better on confidence levels, rising from the two-and-a-half-year low recorded in September. Buyers can also take heart from the fact that input price inflation continued to ease, hitting the lowest rate for almost a year.

Noble said: “The crisis in the Eurozone is keeping everyone on the edge of their seats and raising levels of uncertainty and anxiety in the UK services sector. Growth in the sector is sluggish at best and general business confidence is subdued, resulting in a softer trend in demand. Pressure on pricing has forced businesses to engage in discounting for the first time in 13 months.”

Chris Williamson, chief economist at Markit, said: “Another rather disappointing survey adds to fears that the UK recovery continued to lose momentum at the start of the fourth quarter… With manufacturing contracting, the October PMI surveys are signaling a heightened and substantial risk that the UK could slip back into recession.”

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