Services sector starts 2012 with a boom

3 February 2012

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3 February 2012 | Paul Snell

The UK services sector continued its rapid expansion in January, reporting its strongest growth since March last year.

The Markit/CIPS UK Services Purchasing Managers’ Index (PMI) recorded a figure of 56 last month, a rise compared with December’s figure of 54 and the third consecutive monthly increase. A figure above 50 represents growth.

There was also good news in business confidence, with the biggest one month increase in the survey’s 15-and-a-half-year history; employment, which experienced its highest rise in almost four years and the biggest rise in new business since July, thanks to new products and marketing campaigns.

Coupled with this positive was relief for purchasers as input prices eased to their lowest level in 14 months, although higher fuel, food and wage costs saw charges continue to rise. But the slowdown did mean companies didn’t have to pass price rises onto customers, leaving output prices little changed.

“The surprisingly strong upturn in the service sector follows a similar improvement in manufacturing and ongoing growth in construction, which all points to a resounding revival of UK economic growth in January,” said Markit chief economist Chris Williamson.

CIPS CEO David Noble described the continued growth as welcome but highlighted the precarious economic backdrop. “Unpredictable external factors across the Eurozone could well splinter confidence,” he said. “And in a fiercely competitive business environment where clients are increasingly demanding more for less, the pressure to convert new business and carefully plan capacity is likely to be the test for businesses in 2012.”

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